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:
Total wireless service revenue growth of 2% - 3.5%
Adjusted EBITDA growth of 1% -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
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