To The Moon

We are expecting several Dow Jones stocks earnings in the coming week, and $Verizon(VZ)$ is scheduled to release its third-quarter earnings before market open on Tuesday (22 Oct).

Investors and market will be expecting Verizon to provide an update to its long-term broadband strategy when it reports earnings, expecting to learn more about its fiber builds and also their new fixed wireless access (FWA) subscriber target.

Another telecommunications name $T-Mobile US(TMUS)$ would be reporting its Q3 results after Wednesday (23 Oct) market close, both of them would lead the broadband industry each capturing 85% flow share which is mostly through the fixed wireless access (FWA) subscription.

So I will be looking at how Verizon would be providing how they are going to fund their long-term broadband strategy as this is a heavy and big CAPEX expenditure, how Verizon would be raising the money.

Market expect VZ to report earnings of $1.18 per share, up 6.3% year over year (YoY). Revenue is forecast to arrive at $33.5 billion (+9.7% YoY).

Verizon (VZ) Debt To Equity Analysis

On the debt level side, VZ's net debt to equity ratio (153.7%) is considered high.

Over the last 5 years, we are seeing VZ reducing debt as the debt to equity ratio has reduced from 195.3% to 156.2%, but that remain on the high side.

Though VZ's debt is well covered by operating cash flow (23.6%), if VZ were need to take on more CAPEX intensive project, will the debt coverage increase?

VZ's interest payments on its debt are well covered by EBIT (5x coverage). That might increase if VZ were to take on more debt to fund its long-term broadband strategy.

Verizon (VZ) ROE (Returns On Equity)

If we look at the VZ’s ROE compared to its peers and competitors, it is quite low, and if we were to look at the debt to equity ratio of 1.56 I would consider it to be on the high side.

Verizon Communications does use a high amount of debt to increase returns. Its ROE is quite low, even with the use of significant debt; that is not a good result.

So I will be watching closely what is the plan forward for their long-term broadband strategy and how they intend to fund it, if VZ is not able to borrow or raise fund, we might see a not so positive outlook.

Verizon (VZ) Technical Analysis - MACD and MTF

Though VZ is trading above both short-term and long-term MA, and MTF is also showing some promising uptrend. MACD is also forming a potential bullish crossover.

So the main things as investors we should be watching closely on how VZ have been managing its debt and do understand that VZ business is a heavy capital one, which mean their spending is mostly CAPEX and have a longer horizon to see returns.

If we looked at VZ for the long term, then this might be a good time to look at this stock. Most importantly is how VZ would be updating its long-term broadband strategy plan.

Summary

I would see potential in VZ’s long-term broadband strategy but the low ROE and high ratio of debt to equity might cause some concerns on how VZ would be able to raise money for their next plan for the broadband.

I will be watching closely the guidance and outlook and also the ROE from VZ.

Appreciate if you could share your thoughts in the comment section whether you think VZ ROE would increase and the debt to equity ratio would reduce in upcoming quarterly report.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.