Verizon Communications (VZ +3.05%) reported second-quarter earnings today, with better-than-expected results as the largest U.S. wireless carrier finishes out the first half of 2018. The company had said in June that CEO Lowell McAdam would be retiring, with CTO Hans Vestberg taking the helm. This was McAdam's last earnings call prior to retiring on Aug. 1.
After stabilizing last quarter, Big Red put up strong customer additions and churn remained at impressively low levels.
Verizon Communications results: The raw numbers
|
Metric |
Q2 2018 |
Q2 2017 |
Year-Over-Year Change |
|---|---|---|---|
|
Total operating revenue |
$32.2 billion |
$30.5 billion |
5.4% |
|
Adjusted earnings per share |
$1.20 |
$0.96 |
25% |
|
Total retail wireless connections |
116.5 million |
114.5 million |
1.7% |
|
Retail churn |
1.18% |
1.18% |
-- |
|
Retail postpaid average revenue per account (ARPA) |
$134.56 |
$134.89 |
(0.2%) |
|
Fios video subscribers |
4.56 million |
4.67 million |
(2.3%) |
Data source: Verizon.
What happened with Verizon Communications this quarter?
Verizon enjoyed a total of 531,000 retail postpaid net additions, which includes 398,000 postpaid smartphone net adds. That total also includes tablet losses of 37,000 but additions of 369,000 other connected devices (mostly wearables). The carrier's retail postpaid phone churn was much lower than overall retail churn at just 0.75%.
Image source: Getty Images.
Cord-cutting continues, with Verizon losing 37,000 Fios Video connections during the quarter, but it added a net of 43,00 Fios Internet connections. Here's what else happened in the second quarter:
- Approximately 82% of the carrier's postpaid phone base were on unsubsidized phone plans, up from 75% a year ago.
- Verizon incurred a $658 million pre-tax charge for product realignment, mostly related to shutting down go90.
- Oath revenue for Verizon's media business was $1.9 billion, excluding the impact of new revenue recognition standards.
- Capital expenditures in the quarter were $3.3 billion.
- Total debt declined by $4.4 billion sequentially.
- Verizon added Houston as an additional launch city for 5G service later this year, joining Sacramento and Los Angeles.
What management had to say
There had been some recent speculation that Verizon was considering spinning off Oath. In response to an analyst question, McAdam shot down the rumors, saying, "[T]here is no intention of spinning out Oath," Verizon is already realizing the expected synergies, and the integration is "on schedule."
Regarding 5G, McAdam said, "I believe the impact of 5G on consumers will be much bigger than any previous generation. But the biggest impact will be on businesses as we provide the platform for the fourth industrial revolution."
Looking forward
In terms of guidance, Verizon's outlook improved modestly. The company now expects full-year consolidated revenue growth "at low-to-mid single-digit percentage rates," compared to just "low single-digit percentage rates" in its previous forecast. This increase is attributed to better-than-expected trends in equipment revenue.
Adjusted EPS is still expected to grow in the low-single-digit percentage range before the net impact of tax reform and the new revenue recognition standard. Verizon now expects capital spending for 2018 to come in at the "lower end" of the range of $17 billion to $17.8 billion, and also expects its tax rate to be at the low end of the range of 24% to 26%.
