A quick glance at Verizon’s 1Q2024 earnings

1Q2024:

• Verizon’s $Verizon(VZ)$ Revenue increased by 0.2% year-over-year in 1Q2024 to USD33 billion, slightly below the estimate of USD 33.24 billion.

• Adjusted EPS declined by 4.2% year-over-year in 1Q2024 to USD1.15 per share, surpassing the estimate of USD 1.12 per share.

• Operating expenses rose by 0.5% year-over-year.

For 2024, Verizon expects:

1. Total wireless service revenue growth of 2% - 3.5%

2. Adjusted EBITDA growth of 1% -3%

3. Adjusted EPS of $4.50 to $4.70.

• The revenue and expense growth of the US telecommunications industry suggest that it may have entered a mature business cycle with limited growth catalysts.

• While investors typically anticipate improved profit margins from companies in mature cycles, Verizon has struggled to achieve greater profitability or enhance its earnings growth over the years.

• PE ratio looks inexpensive at 8.57x relative to 10 year average of 11.3x.

• The indicative dividend yield appears attractive at 6.86%.

• However, Verizon's 3-year annualized return of -6.89%, 5-year annualized return of -2.49%, and 10-year annualized return of 2.93% indicate that investors who have held Verizon stock for the past 3 or 5 years have experienced losses.

• The 12-month Bloomberg consensus analysts' target price for Verizon is USD44.69, suggesting an upside potential of 15.8% compared to yesterday's closing price of USD38.60.

• We favor companies like Pepsi $Pepsi(PEP)$ and Coca-Cola $Coca-Cola(KO)$ , which operate in mature business cycles but have demonstrated the ability to improve their earnings growth over time.

Source: Bloomberg, 23 Apr 2024