Verizon shares down 2% as sales miss expectations; Reaffirms FY24 outlook

Verizon's Q2 earnings report revealed a mixed performance, with the company meeting expectations in some areas while falling short in others. Adjusted earnings per share (EPS) came in at $1.15, matching the estimated $1.15 but down from $1.21 year-over-year. Operating revenue for the quarter was $32.8 billion, missing the estimated $33.07 billion. This shortfall in revenue was driven by lower-than-expected performance in both consumer and business segments. Consumer revenue was $24.9 billion against the expected $25.16 billion, and business revenue stood at $7.3 billion, slightly below the anticipated $7.35 billion.

Shares of VZ are down approx 2% in reaction to the results. The stock has been chopping around in the $40-42 area for most of 2024. These results are likely to keep the stock in that narrow pattern.

Despite the revenue miss, Verizon's wireless service revenue showed resilience, reaching $19.8 billion, just above the estimate of $19.79 billion. This represents a 3.5% increase year-over-year, primarily driven by growth in the consumer wireless service sector. The company added 28,000 FIOS Internet subscribers, though this was below the expected 38,089. Adjusted EBITDA was $12.3 billion, marginally surpassing the estimate of $12.29 billion, indicating solid operational efficiency.

Verizon maintained its full-year guidance, projecting adjusted EPS between $4.50 and $4.70, aligning with the estimate of $4.57. The company also reaffirmed its expectation for wireless service revenue growth of 2% to 3.5% and capital expenditures in the range of $17 billion to $17.5 billion, close to the estimate of $17.34 billion. This steady outlook reflects confidence in their ongoing strategies despite the mixed quarterly results.

The company highlighted some key areas of growth and challenges in its consolidated results. Total consolidated operating revenue for Q2 2024 was $32.8 billion, marking a 0.6% increase from Q2 2023, driven by service and other revenue gains. However, cash flow from operations in the first half of 2024 decreased to $16.6 billion from $18.0 billion in the first half of 2023, due to higher cash taxes and interest expenses. Capital expenditures also decreased to $8.1 billion in the first half of 2024, compared to $10.1 billion in the same period last year, as the company returned to historic levels of capital intensity.

In the consumer segment, Verizon reported a 1.5% year-over-year increase in total revenue, reaching $24.9 billion, with wireless service revenue up 3.7% to $16.3 billion. The company saw a significant reduction in wireless retail postpaid phone net losses, from 136,000 in Q2 2023 to just 8,000 in Q2 2024. However, the consumer segment faced challenges with 624,000 wireless retail prepaid net losses, primarily due to the shutdown of the Affordable Connectivity Program.

Verizon's business segment saw a 2.4% year-over-year decrease in total revenue, totaling $7.3 billion, despite a 2.4% increase in business wireless service revenue to $3.4 billion. The business segment reported 268,000 wireless retail postpaid net additions, including 156,000 postpaid phone net additions, indicating strong growth in mobility and fixed wireless. However, declines in wireline revenue contributed to a decrease in segment operating income and EBITDA.

Verizon is reaffirming its full-year 2024 guidance, projecting adjusted EPS to range from $4.50 to $4.70, in line with the estimated $4.57. The company expects wireless service revenue growth of 2% to 3.5% and capital expenditures between $17 billion and $17.5 billion, close to the estimated $17.34 billion.

Overall, while Verizon's Q2 performance showed some areas of strength, particularly in wireless service revenue and postpaid phone net additions, the company faced challenges in meeting revenue expectations and maintaining cash flow levels. The reaffirmation of full-year guidance reflects a cautious optimism about the company's strategic direction and ability to navigate the current market environment.