Yahoo Finance Verizon Surges Most in 15 Years on Profit Beat, Raised Guidance
(Bloomberg) -- Verizon Communications Inc. shares surged the most in 15 years after the telecommunications giant posted third-quarter results that topped analysts’ predictions. It’s a sign that higher pricing and additions to its home internet and business phone units offset weakness among mobile phone consumers.
Most Read from Bloomberg
How This Israel-Hamas Conflict Is Like Nothing That’s Happened Before
Ukraine Recap: Russian Su-25 Fighter Jet Said to be Shot Down
Russia Closes Airport After a Mob Attack on Airplane From Israel
The largest US wireless carrier reported adjusted earnings per share of $1.22 in the third quarter, according to a statement Tuesday. Wall Street expected adjusted earnings of $1.18 a share, according to an average of estimates compiled by Bloomberg.
New York-based Verizon also raised its guidance for the year, saying it expects free cash flow of above $18 billion, a $1 billion increase from its previously issued guidance. Operating revenue for the quarter was in line with analysts’ estimates, at $33.3 billion.
Shares closed regular trading Tuesday up 9.3%, the biggest jump since October 2008. Competitors were buoyed by Verizon’s strong results, with AT&T Inc. rising 3.9% and T-Mobile US Inc. up 2.4%.
“Our goals are clear — deliver strong growth in wireless service revenue and free cash flow,” Chief Executive Officer Hans Vestberg told investors. “Our segmented and disciplined approach to consumer mobility is working and we expect our momentum to continue building in the fourth quarter.”
Verizon added a net 100,000 mobile phone subscribers, compared to Wall Street’s estimate of 68,197. The gain was led by its business group. The consumer group lost 51,000 mobile customers, an eased decline from the previous quarter.
The company’s home internet division saw strong growth, adding 384,000 wireless home internet customers, more than the 262,000 analysts expected, as well as 72,000 Fios wired home internet customers, compared with analysts’ expectation of 57,028. The gains brought Verizon’s total broadband subscribers to 10.3 million, including nearly 2.7 million customers of its wireless home internet, also known as fixed wireless.
Verizon’s “surprisingly high” phone additions “suggest that the company has stopped shedding market share,” Bloomberg Intelligence senior analyst John Butler said in a note. “The result signals that its latest moves to improve growth, including launching new plans, may be starting to have a positive impact on performance.”
The results come days after AT&T reported third-quarter earnings and subscriber growth that beat analysts’ estimates. T-Mobile, the No. 2 carrier in the US, reports its results Wednesday before market.
Like its rivals, Verizon has faced slowing mobile demand amid broader headwinds in the telecoms industry. The companies have fiercely fought to steal away each other’s customers in recent years in a desperate hunt for growth.
The company invested heavily in 5G airwaves that haven’t generated new mobile users. Before Tuesday, Verizon had lost about 200,000 mobile-phone customers since 2021, while T-Mobile has added more than 5 million, according to company filings. Shares had fallen 20% this year as of the close of trading Monday.
Verizon’s consumer unit accounts for the vast majority of the company’s revenue, and it’s betting on regaining those lost mobile subscribers, tapping nine-year company veteran Sowmyanarayan Sampath to lead the division earlier this year. Sampath’s target is about 1 million new customers a year.
Read More: Verizon Turns to Inside Fixer to Pull Mobile Giant Out of Slump
Like other carriers, Verizon lost billions in revenue as smartphone sales dwindled in a reversal of the pandemic boom. Customers are content waiting longer between upgrades. The slow pace has a knock-on effect: the wireless providers rely on offerings like free phones to bring in new customers and fuel growth.
To contend, Verizon has turned to price increases, raising prices three times in two years and marking up its wireless home internet prices by $10. It also activated a fresh swathe of airwaves useful for fast connections.
Those pricing changes helped to boost revenue, with more customers selecting premium plans after the company simplified tiers and set extra charges for some streaming services.
“We see customers liking the flexibility,” with roughly 70% opting for a premium plan, Verizon Chief Financial Officer Tony Skiadas said in an interview. “The offers are resonating.”
Wireless home internet is on pace to reach announced goals of 4 million to 5 million customers by 2025, Skiadas said. “We’re well on our way toward that,” he said.
Verizon also contends with potentially high costs to clean up lead-covered cables in parts of its network. It has said the potentially problematic lead-sheathed cable makes up a small percentage of its copper network composed of less than 540,000 miles of cable. Rival AT&T also faces possibly high costs of dealing with lead in its old copper phone network.
(Updates shares in first and fourth paragraphs, additional details from 10th paragraph)
Most Read from Bloomberg Businessweek
Sam Bankman-Fried Takes Stand in Reminder of Crypto’s Epic Fall
The Business of Children’s Books in This New Era of Book Banning
X, One Year Later: How Elon Musk Made a Mess of Twitter’s Business
A Complicated Billionaire Shoots for the Moon on The Businessweek Show
©2023 Bloomberg L.P.
