Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Verizon Communications Inc. Earnings: Solid Wireless and FiOS Results Propel Shares Higher

By Joe Tenebruso - Oct 20, 2015 at 12:58PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The telecom titan delivered better-than-expected subscriber gains in the third quarter.

Source: Verizon

Verizon Communications ( VZ -0.53% ) reported third-quarter results before the market open this morning. The largest U.S. wireless carrier's revenue and earnings came in above Wall Street's expectations, and shares were up about 2% on the news as of 12:30 p.m. ET.

Wireless results
Verizon added 1.3 million new monthly wireless subscribers in the third quarter, which topped analyst expectations of only 1.1 million, according to Bloomberg. In addition, Verizon continues to show signs of strong customer loyalty, with its retail postpaid churn rate remaining low at 0.93%, a 7-basis point improvement from the year-ago quarter. That's impressive because it shows that Verizon is not only adding new customers, it's also doing an excellent job of keeping its existing customers. Combined, that helped Verizon's total retail connections rise 4.3% to 110.8 million nationwide at the end of the third quarter.

The strong subscriber numbers helped drive a 5.4% year-over-year increase in wireless revenue to $23 billion. Profitability also improved, with operating margin rising to 33.3% from 31.9% in the third quarter of 2014 and segment EBITDA (earnings before interest, taxes, depreciation, and amortization) margin increasing to 43.2% from 41.6%. 

Wireline results 
In Verizon's wireline division, FiOS remains a bright spot. Verizon added 114,000 net new FiOS Internet connections and 42,000 net new FiOS Video connections in Q3. That helped bring Verizon's totals to 6.9 million FiOS Internet and 5.8 million FiOS Video connections at the end of the third quarter, representing year-over-year increases of 7.2% and 5%, respectively. Together, that drove a 7.5% rise in FiOS revenue compared to the year-ago quarter. 

Profitability also improved in Verizon's wireline division in Q3, with operating margin increasing to 6.2% from 2.3% in the third quarter of 2014 and segment EBITDA margin rising to 23.5% from 23%. Still, as the world continues to shift toward more mobile-based communications, Verizon's wireline operations remain a declining business, with total operating revenues declining 2.3% to $9.4 billion. 

Consolidated results 
All told, Verizon's total operating revenue rose 5% to $33.16 billion in the third quarter. That was slightly above the $32.98 billion Wall Street expected. Earnings per share, adjusted for pension-related and other non-recurring charges, also came in ahead of expectations, increasing 17% to $1.04. That was above the $1.02 analysts projected. 

More importantly, Verizon remains a cash-flow-generating machine. Even after adjusting for a non-reoccurring $2.4 billion gain related to the monetization of tower assets in the first quarter, operating cash flow increased to $26 billion in the first nine months of 2015, up from $23.2 billion during the same period of 2014. And adjusted free cash flow (excluding the tower sale) totaled $13.5 billion during the first three quarters of 2015, up from $10.5 billion in the year-ago period. 

Guidance 
Looking ahead, management reiterated its expectations for consolidated revenue growth of at least 3% for full-year 2015. Management also still projects full-year 2015 capital expenditures to range between $17.5 billion and $18.0 billion. 

"Verizon continues to grow earnings by delivering network reliability and superior value that continues to attract new customers," said Chairman and CEO Lowell McAdam in a press release. "Verizon Wireless posted another quarter of quality connections growth -- even better than in the second quarter -- while maintaining high customer loyalty and profitability. Meanwhile, fios customer growth also improved from the previous quarter. We expect future revenue growth from mobile over-the-top video, including digital advertising, and the Internet of Things."

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Verizon Communications Inc. Stock Quote
Verizon Communications Inc.
VZ
$51.15 (-0.53%) $0.27

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
624%
 
S&P 500 Returns
140%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/06/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.