Verizon earnings preview: After stemming losses, can real momentum now build?

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Verizon Communications Inc. already disclosed that it reversed its negative subscriber trends in the fourth quarter, but there’s more to be shared about the company’s story.

The wireless giant is set to post fourth-quarter results Tuesday morning amid continued skepticism on Wall Street about the company’s ability to drive a bigger change in its business. Verizon VZ, -0.93% may have stemmed the bleeding after three quarters in a row of subscriber declines in its consumer postpaid business, but analysts, who are mainly neutral-rated on the stock, have questions about Verizon’s ability to pick up real momentum in a competitive wireless market.

See more: What’s ahead for Verizon? After a dismal 2022, it’s time to hear the turnaround plan.

Here’s what to expect ahead of Verizon’s report, which is due out before Tuesday’s opening bell.

What to expect

Earnings: Analysts tracked by FactSet expect the company to post adjusted earnings per share of $1.19 for the fourth quarter, down from $1.31 a year before. According to Estimize, which crowdsources projections from hedge funds, academics and others, the average estimate calls for $1.22 a share.

Revenue: Analysts surveyed by FactSet anticipate that Verizon generated $35.09 billion in revenue for the latest quarter, up from $34.10 billion a year before. Those contributing to Estimize expect $35.16 billion on average.

Stock movement: Verizon shares have fallen following each of the company’s past four earnings reports. The stock is up 12% over the past three months, though it’s fallen 25% over a 12-month span.

Of the 28 analysts tracked by FactSet who cover Verizon’s stock, seven have buy ratings, 19 have hold ratings, and two have sell ratings, with an average price target of $44.34.

What to watch for

While Verizon Chief Executive Hans Vestberg already teased that the company achieved its goal of positive consumer subscriber growth in the fourth quarter, but the company has yet to reveal the scale of those gains.

Evercore ISI analysts led by Vijay Jayant expect that the company saw 50,000 postpaid phone net additions in its consumer business, down from the 336,000 it saw in the fourth quarter of 2021. They anticipate that Verizon saw a 12-basis-point increase in its churn relative to a year ago.

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The company’s outlook for fiscal 2023 will also be of key interest.

“We are expecting Verizon’s 2023 guidance to be impacted by the same competitive and macro pressures that led to management lowering 2022 guidance in July — cost inflation, competition, increased promotional subsidies, higher interest rates, and business vs. consumer customer growth mix,” wrote Deutsche Bank analyst Bryan Kraft. In addition, he notes the potential for “a slower demand ramp in 5G mobile edge compute services and higher cash taxes (possibly, depending on management’s assumptions underlying the FCF [free-cash-flow] guidance).”

However, such pressures “appear to already be reflected in consensus estimates,” Kraft added.

See also: AT&T could ‘turn the corner’ on a key metric this year

Verizon’s narrative continues to invite skepticism on Wall Street.

“We find the near-term setup to be negative for VZ with the valuation above

historical averages and fundamentals struggling to show sustainable growth,” wrote KeyBanc Capital Markets analyst Brandon Nispel, who has a sector-weight rating on the stock. “We are below consensus estimates and see headwinds to EPS [earnings-per-share] growth that are likely to cause a short-term negative reaction to the stock.”

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