Key Takeaways
- The telecom giant secured 184,000 postpaid phone net additions during Q2, significantly surpassing Wall Street’s 106,000 projection
- Total revenue declined 0.7% year-over-year to $34.3 billion, falling short of the $35.2 billion consensus forecast
- Adjusted earnings per share reached $1.30, exceeding analyst expectations of $1.28
- Net income decreased to $3.95 billion, impacted by $1.8 billion in pretax special charges, notably from the newly formed BT Group partnership
- Company upgraded full-year adjusted EPS forecast to $4.99–$5.04 range; mobility and broadband service revenue growth projections increased to 2.5%–3%
Shares of Verizon (VZ) climbed 4% during Friday’s premarket session following the telecommunications company’s Q2 earnings report, which demonstrated accelerating subscriber growth under CEO Dan Schulman’s leadership.
Verizon Communications Inc., VZ
The company announced 184,000 postpaid phone net additions during the three-month period, substantially outperforming the FactSet consensus estimate of 106,000. This marks a significant turnaround from the same period last year, when Verizon experienced net losses in this category.
Total revenue reached $34.3 billion, representing a 0.7% year-over-year decline and missing analyst projections of $35.2 billion. Management attributed the shortfall to an approximately 20% decline in equipment sales, as consumers retained their devices for extended periods and the company scaled back device subsidy programs.
However, the revenue shortfall shouldn’t cause alarm among wireless sector investors. The decline represents a strategic pivot away from expensive promotional campaigns, which Schulman identified as a key focus area when he assumed the CEO position last October.
Adjusted earnings per share came in at $1.30, up from $1.22 in the prior-year period and surpassing the $1.28 analyst consensus.
Net income experienced a significant decline to $3.95 billion, or 92 cents per share, compared to $5.12 billion, or $1.18 per share, in the year-ago quarter. The decrease stemmed from $1.8 billion in pretax special charges.
International Partnership Impacts Bottom Line
The largest component of these charges was a $746 million loss associated with Verizon’s partnership agreement with BT Group. The collaboration, announced last month, merges their international businesses into a joint venture, enabling both telecommunications providers to concentrate resources on their domestic markets.
Verizon also reported 348,000 net broadband connection additions during the quarter. Mobility and broadband service revenue increased 2.8% to $23.4 billion.
Management projects this growth rate will “approach” 3% during Q3 and climb to approximately 4% in Q4.
Updated Full-Year Outlook
The company elevated its full-year adjusted EPS guidance to a range of $4.99–$5.04, up from the previous $4.95–$4.99 range. Full-year retail postpaid phone net additions guidance remains unchanged at 875,000 to one million.
Verizon also increased its full-year mobility and broadband service revenue growth expectations to 2.5%–3%, up from the prior 2%–3% range.
The previous week, Verizon announced plans to eliminate approximately 3,000 positions and transfer hundreds of retail locations to franchise operators. Roughly 500 of these reductions affect corporate positions.
Schulman stated that Verizon has accomplished “a step-change in churn reduction” while simultaneously decreasing customer acquisition expenses. He characterized the performance as reflecting the company’s “strongest operating position we have seen in years.”
A recently introduced pricing plan launched last month provides unlimited data for $45 monthly for existing subscribers, or $30 for new customers switching from competitors — substantially below the standard $55 entry price point.
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