Verizon Posts Q4 Profit, Beats Expectations

Verizon Communication Inc. reported higher than expected fourth quarter earnings on Thursday. It was bolstered by the addition of 1.5 million wireless retail postpaid users and other tax benefits. The telecom company has swung to a profit of $5.51 billion or $1.32 per diluted common share, from a loss of $2.14 billion or 54 cents per share, the same quarter last year.

Shares of the major telecom provider rose to $46, up $1.59 or 3.57 percent. The company, known for its high quality network, reported an adjusted non-GAAP earnings per share of 89 cents, exceeding the Wall Street expectation of 88 cents. In the non-GAAP computation, Verizon excluded favorable accounting adjustments made to its pension obligations and gain from a sale of a spectrum license amounting to 44 cents per share in total. 

“We are entering 2016 with a lot of confidence. Verizon’s strong growth in earnings, and growth in high-quality connections and profitability in wireless resulted in free cash flow,” said Fran Shammo, chief financial officer. The total investment in the wireless company is $3.3 billion in the fourth quarter and $11.7 billion up 11.5 percent for a full year. Verizon declared its plan to pilot into 5G technology in 2016. 

“The carrier is taking a thoughtful approach towards architecting its business towards what it believes will be a ‘dual play world’ – wireless and broadband,” said Amir Rozwadowski, an analyst at Barclays PLC, in a report. “The key on the former is to ensure long-term network capacity through its support for LTE migration, new technology adoption and leading the charge on 5G while simultaneously creating platforms that expand its TAM,” or total addressable market. Verizon has recently announced new pricing models and plans that has changed old plans which permitted unlimited data usage. Now, the average revenue is expected to rise as users move up to higher priced tiers the company stated. 

“Wireless data opportunities are expanding. About 70% of Verizon Wireless postpaid subscribers are using smartphones. Therefore, the company still has an incremental penetration opportunity for wireless data services,” wrote David Heger an analyst at Edward Jones, in his report.

For the complete year, the company’s net income was $18.37 billion or $4.32 per share, 53.7 percent increase from the year-earlier income of $11.95 billion, or $2.42 per share. Revenues drastically rose to $131.62 billion from $127.09 billion.