Verizon's Earnings Momentum and Dividend Strength Signal an Upward Turn Ahead of July Release

The telecommunications giant Verizon Communications (VZ) is poised to deliver its quarterly earnings report on July 21, 2025, and investors should take note. With a robust track record of earnings surprises, a favorable Zacks Earnings ESP signal, and a dividend yield of 6.5%, Verizon presents a compelling opportunity for investors seeking stability and growth. Here's why the stock could surge post-earnings.

A History of Beating Expectations

Verizon has consistently outperformed earnings estimates over the past two years, with seven out of the last eight quarters resulting in a beat or match. For instance:
- In Q1 2024, it reported EPS of $1.15 versus estimates of $1.12, despite modest revenue growth.
- The most recent quarter (Q4 2023) matched estimates exactly at $1.08, while revenue exceeded expectations by $500 million.

This pattern suggests management's ability to navigate macroeconomic challenges and deliver results. Analysts now project FY 2024 EPS of $4.71, a 2.8% increase from 2023, reflecting sustained operational discipline.

The Zacks Earnings ESP Advantage

Verizon's Earnings ESP score of +1.37% signals that the Most Accurate Estimate (MAE) is higher than the Zacks Consensus, indicating rising optimism among analysts. Historically, a positive ESP correlates with a 70% chance of an earnings surprise when paired with a Zacks Rank #3 or better—a “Hold” rating that, in this context, suggests neutral to bullish momentum.

The current Zacks Rank #3 should not deter investors. The model's predictive power lies in its ability to highlight companies where analyst revisions align with positive fundamentals. For Verizon, this includes its record EBITDA growth and expansion of broadband services, which could drive incremental revenue.

Dividend Safety Amid Growth Priorities

Verizon's dividend yield of 6.5%—more than double the S&P 500 average—is underpinned by a 58% payout ratio (based on earnings) and a 56.6% payout ratio relative to free cash flow (FCF). This leaves ample room for growth without overextending the balance sheet.

Key financial metrics reinforce this stability:
- FCF of $3.64 billion in Q1 2025 supports dividend coverage (1.6x).
- Debt-to-EBITDA of 3.13x remains manageable, with low refinancing risk ($24.5 billion due over the next year).

While some may worry about the high payout ratio, Verizon's focus on cost discipline (e.g., operating margins of 14.6%) and its $17.5–18.5 billion annual FCF guidance ensure dividends remain safe.

Strategic Catalysts for Growth

Beyond earnings, Verizon's 5G and fiber broadband initiatives are critical to its future. Management has committed to expanding fiber coverage to 100 million households by 2028, a move that could solidify its position in the high-margin broadband market. Additionally, postpaid net adds (239,000 in Q1 2024) and rising demand for premium wireless plans signal strong consumer engagement.

Risks and Considerations

• Competitive Pressures: Rivals like T-Mobile continue to invest in 5G and aggressive pricing.
• Regulatory Hurdles: Antitrust scrutiny and infrastructure costs ($117 billion in capital spending projected) could weigh on margins.
• Economic Sensitivity: A slowdown in consumer spending could impact service upgrades.

Investment Thesis and Call to Action

Verizon's combination of earnings reliability, dividend safety, and strategic investments positions it to deliver a positive surprise on July 21. With a Zacks ESP signal and a historical average surprise of 2.2%, investors should consider:
1. Buying ahead of earnings: A favorable report could narrow Verizon's valuation discount (P/E of 11.7x vs. 23.5x for the S&P 500).
2. Long-term hold: The dividend yield and FCF stability make VZ a defensive play with upside potential.

The stock currently trades at $41.14. A post-earnings breakout could test resistance at $44–$45, supported by a target price of $48.10 from analysts.

Final Word

Verizon's upcoming earnings are a pivotal moment for investors. With a track record of outperformance, a favorable Zacks ESP signal, and a dividend that rewards patience, this telecom leader is primed to deliver gains. As management emphasizes its 5G and broadband roadmap, now is the time to position for Verizon's next chapter.

Action Item: Consider adding Verizon to your portfolio ahead of July 21, with a stop-loss below $39 to protect against downside risk.