When is bad good? When bad is better than expected. Is when. Verizon Communications (VZ) reported the company’s fiscal performance in the second quarter on Friday morning. Verizon puts a adjusted EPS of $ 1.18 on the ribbon, which exceeded the consensus view. The firm also produced revenue of $ 30.4 billion. That number, due to the impacts of the pandemic, amounted to an interannual decrease of 5.3%, but it also exceeded the street.
Readers will recall that Verizon had already discontinued the company’s previous revenue guidance earlier this year, and had guided adjusted earnings to a growth range of + 2% to -2%. A positive conclusion this morning could be that Verizon reiterated that guidance. Readers should also be aware of the fact that Verizon (among all US wireless and broadband service providers) agreed at the start of this pandemic to waive late payment and surplus charges, while maintaining an active service for clients who cannot pay their bills due to their personal situation. That promise ran its course in late June.
Performance
The numbers are really everywhere due to the impact of this virus. Breaking things down, the consumer-based unit contributed revenue of $ 21.1 billion, which was a 4% decrease year-over-year. Wireless service revenue printed -1.7% to $ 15.9 billion. This number was considerably better than most analysts had been searching for. On the commercial side, sales fell 3.7% to $ 7.5 billion. Perhaps the most notable positive occurred in wireless postpaid subscribers, where Verizon added 76K accounts versus a consensus view that had called for a 100K contraction. Elsewhere, the media business really suffered when advertising ran out. That unit only contributed $ 1.4 billion, which adds to a decrease of 24%.
This more complicated line is in net subscribers. Verizon reported a net profit of 173K, which includes past due accounts that were protected through June. Rival AT&T (T) counted 338,000 overdue accounts when they reported disconnected earlier this week. That decision resulted in AT&T reporting a net reduction in subscriptions of 151K. Finally, by the end of the quarter, approximately 60% of Verizon’s retail stores had reopened.
Don’t sell Verizon
It’s a joke. You can do whatever you want. I am not selling my Verizon. At least not yet. Have a look.
What do we have here? It looks like the same pandemic-induced cup with a loop pattern that is visible throughout the universe on our stock chart. The big difference here is that the handle didn’t break, but instead became the left side of a near-perfect double bottom. This moves the pivot to the top of the center of the “W”, and that’s where the stocks are trading right now. In other words, these stocks are at the pivot and could explode now.
In the telecommunications world, exploding doesn’t mean shares go to $ 100. It could mean, though, that shares go to $ 65, while they pay shareholders $ 2.46 a year just to stay. Incidentally, the next quarterly tranche comes out on August 3, provided you are a registered shareholder on July 10. That’s a 4.4% return. All in all, I have no problem allowing Verizon to take up space in my book, even if it stays there.
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