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Verizon Communications Should
the Broader Market
Over Both the Near and Long Terms

Once again, Ian Gendler shines the spotlight on Verizon Communications (VZ) in Market Focus, Value Line’s open-access newsletter providing unbiased insights on investments, the markets and the global economy.

The New York-headquartered telecom behemoth has a market capitalization of around $240 billion and has been a member of the Dow Jones Industrial Average since April 2004.

Verizon is likely putting the finishing touches on a record year. Notably, this telecommunications giant reported September-interim earnings of $1.22 a share, two cents above our estimate and a hefty 24% jump relative to the year-ago result, on a 2.8% top-line advance. Once again, Verizon Wireless was the star of the show during the quarter, with the division reporting a 6.5% increase in third-quarter revenues, and service revenues, which had been declining earlier in the year, rising 0.8% year over year during the quarter. Separately, total revenues for the Wireline division's FiOS fiber-optic-based services were up 1.5% year over year, due to decent demand for high-quality broadband service. Of note, though, the division added 54,000 FiOS Internet connections, yet lost 63,000 FiOS Video connections, due to the ongoing shift away from traditional bundled video offerings. Hence, we are confident Verizon will post earnings of $4.65 a share in 2018, with an advance of a dime a share likely in 2019.

The company's finances are in solid shape. Verizon ended the September interim with $2.5 billion in cash (down from $4.5 billion a year ago), and long-term debt of $106.4 billion (down from $115.3 a year ago). Going forward, we would not be surprised to see the company further boost its dividend payout (the quarterly dividend was recently increased by 2.1%, to $0.6025 a share) and make additional acquisitions. Management has made it clear that it is committed to enhancing Verizon's strategic capabilities and expanding its wireless spectrum business.

In sum, Verizon stock holds broad appeal. 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 high-quality equity's dividend yield (4.1%), which is almost double the Value Line median.

Editor’s Note: Ian Gendler is Executive Director, Value Line Research, 551 Fifth Ave., FL 3, New York, NY 10176.

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