Verizon’s Earnings Were Good Enough. What You Need to Know.

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Verizon

Communications delivered as-expected results for the 2021 fourth quarter on Tuesday morning, and management added guidance for 2022 that didn’t rock the boat either.

Verizon stock (ticker: VZ) slipped 1% in morning trading to $52.42, versus a 2.4% decline for the

S&P 500
and a 1.9% slide for the

Dow Jones Industrial Average.

Verizon reported $1.11 in earnings per share for the last three months of 2021. Adjusted for one-time costs and benefits including pension charges and early debt redemption, Verizon earned $1.31 per share, up 8% year over year and narrowly exceeding Wall Street’s $1.28 consensus. 

Verizon’s fourth-quarter revenue came in at $34.1 billion, down about 2% and matching analysts’ estimate. Adjusted earnings before interest, taxes, depreciation, and amortization, or Ebitda, was $11.8 billion—again right in line with forecasts—and net income was $4.7 billion. Both of those profit measures were about flat from the same period a year earlier.

Like its wireless rivals

AT&T

(T) and T-Mobile US (TMUS), Verizon’s focus these days is all about 5G. The company lit up newly acquired C-Band spectrum across its network last week, adding faster coverage in more areas. Verizon brands its mid-band and high-band 5G service as 5G Ultra Wideband, or 5G UW on some phones.

Verizon’s strategy is to develop deeper relationships with its subscribers—meaning selling them more services and lifting average revenue per account—and to leverage new technologies enabled by 5G, like wireless home broadband service. 

Management prefers to point to wireless service revenue growth than subscriber growth. The former measure was up 6.5% year over year in the fourth quarter, to $17.8 billion, ahead of Wall Street’s $17.6 billion forecast. That growth was boosted by the closing of the $6 billion acquisition of prepaid wireless company TracFone in the fourth quarter. It added some 20 million prepaid subscribers to Verizon’s roster. (The company also closed its sale of Verizon Media Group to a private-equity firm in the quarter.) Verizon’s consumer wireless results were stronger than its business results in the period.

The company added a net 558,000 wireless postpaid phone subscribers—meaning those who pay a monthly bill, a closely watched metric for wireless companies—narrowly exceeding estimates. It compares with a combined 1.7 million added by AT&T and T-Mobile in the quarter.

Verizon’s postpaid average revenue per account rose to $144.88 in the fourth quarter, versus $141.17 in the same period a year earlier. About a third of Verizon’s customers are on its top-tier unlimited service, CEO Hans Vestberg said Tuesday. That means there’s plenty more room for the company to continue nudging its existing subscribers to higher-priced plans which include more perks, like streaming services and cloud storage.

Verizon’s fixed wireless broadband subscriber growth was a bit better than expected, with the company adding 78,000 customers to its nascent service, versus 75,000 consensus. Wired Fios broadband subscriber growth was worse than forecast however, coming in at 51,000 while Wall Street had been looking for 78,000.

“Verizon continued its recent trend of reporting solid wireless subscriber growth and expanding average revenue per wireless account,” wrote David Heger, communications analyst for Edward Jones, on Tuesday. “We estimate that Verizon can continue to grow its base of wireless subscribers as it further expands its 5G network, offering opportunities for new business data services, premium consumer plans, and wireless home internet services.”

In 2022, Verizon management expects its wireless service revenue to be up 9% to 10%, or at least 3% when adjusting for the addition of TracFone. The company guided to overall service revenue growth of around 3% on Tuesday, or between 1% and 1.5% adjusting for the TracFone and Verizon Media Group transactions. Those revenue targets are both above Wall Street’s numbers.

Management also said Tuesday they expect adjusted Ebitda growth of 2% to 3% and adjusted earnings per share of $5.40 to $5.55 in 2022, which would be up from $5.39 last year. Analysts’ consensus estimate before Verizon’s fourth-quarter report was for $5.36 in adjusted earnings per share in 2022.

Verizon will host an investor day on March 3.

Verizon stock had lost about 5% after dividends over the past year through Monday’s close, versus a 16% return for the S&P 500. AT&T stock had lost close to 3% and T-Mobile’s had shed about 19%.

Write to Nicholas Jasinski at [email protected]