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Verizon Communications
should outperform the broader market
over both the near and long terms.

Ian Gendler, Executive Director, Value Line Research,, recently highlighted Verizon Communications (VZ).

“The New York-headquartered telecom behemoth has a market capitalization of around $200 billion and has been a member of the Dow Jones Industrial Average since April 2004.

Verizon started off 2018 in fine fashion. It achieved first-quarter earnings of $1.17 a share, seven cents above our estimate and 23% higher than the year-earlier tally, on a 6.6% top-line improvement. In our view, the good news should continue. Indeed, its key VZ Wireless division reported a 4.7% increase in first-quarter revenues, the company's second year-over-year wireless revenue growth in two years. The percentage of phone activations on device payment plans was 81% in the March period, compared to 72% last year, which has helped ease service revenue declines, which seemed to be improving toward the end of the first quarter. VZ Wireless tallied 260,000 retail postpaid net additions during the March period, bringing its total number of retail connections to 116.2 million, a 2% year-over-year increase.

The Tax Cuts and Jobs Act was certainly a blessing for domestically-rooted Verizon. Notably, the expected savings from tax reform is likely to generate a net $3.5 billion to $4.0 billion uplift in cash from operations in 2018. Management expects this to result in a $0.55-$0.65 increase in 2018 share earnings. Hence, we now look for 2018 earnings to hit the $4.60-a-share mark (up from $3.74 last year).

The company has a strong financial position, making Verizon well positioned to continue to consider bolt-on acquisitions in the years ahead. Enhancing its strategic capabilities and building out its wireless spectrum assets would likely be the areas of focus. Verizon should continue to be shareholder friendly, too. Stock repurchases and dividend hikes appear likely.

Verizon stock holds broad appeal. To wit, according to our analysis and proprietary measures, the issue should outperform the broader market over both the near and long terms. What's more, income-seeking investors may be drawn to the equity's dividend yield (almost 5.0%), which is more than double the Value Line median.”

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