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Why Veon Ltd (ADR) Stock Fell Thursday

By Daniel Sparks - Feb 22, 2018 at 12:22PM

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Here's what's behind Veon's fourth-quarter results.

What happened

Communications and technology company Veon's (VEON -1.96%) stock fell as much as 12.8% on Thursday, following the company's fourth-quarter results. The stock's sell-off may reflect Veon's lower-than-expected revenue for the quarter.

Veon's fourth-quarter revenue was $2.32 billion, below an analyst estimate for revenue of $2.43 billion. Revenue was down 1.4% year over year, driven primarily by a "significant devaluation of the Uzbek som," management said. 

A chalkboard sketch of a downward trending chart.

Image source: Getty Images.

So what

Even when excluding foreign currency movements, Veon's organic revenue increased just 1.2% year over year -- still below the 3.4% growth the analyst covering Veon was expecting. This organic growth was helped by momentum in Russia, Pakistan, Ukraine, and Uzbekistan, management noted. But it was "partially offset by continued pressure in Algeria and Bangladesh."

Also negatively impacted by the devaluation of the Uzbek som, Veon's earnings before interest, taxes, depreciation, and amortization (EBITDA) fell 3.8% year over year to $753 million.

On a positive note, the company delivered on its fiscal year 2017 targets for organic revenue growth and EBITDA with total revenue for the period rising 6.6% and EBITDA increasing 11%.

Now what

For 2018, management expects "flat-to-low single digit organic growth for both Group revenue and EBITDA." The expected deceleration is because Veon's financials "will be impacted by Uzbekistan's currency liberalization and a number of strategic transactions including the Pakistan tower transaction closing and the integration of the Euroset business in Russia," management noted.

Fortunately, management expects cash flow to improve, guiding for equity free cash flow in fiscal year 2018 of about $1 billion, up from $804 million in 2017.

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