On Mar 5, we maintained our Neutral recommendation on
Verizon Communications Inc.
(
VZ
-
Analyst Report
) , considering its tight grip over the telecommunication
business, plus ample growth opportunities and market share
capture potentiality. However, the company faces certain
headwinds that will likely slow down its expansion speed in the
coming months. The largest wireless carrier in the North
America also holds a Zacks Rank #3 (Hold).
Why Maintained?
We believe that Verizon has a strong foothold in the wireless
sector and continues to tap additional market share via robust
deployment of the 4G Long Term Evolution (LTE) network. This is
expected to lead to improved operating and capital efficiency.
Strong sales of Apple's iPhone as well as increased adoption of
Google Inc
.'s (
GOOG
-
Analyst Report
) Android smartphones will boost data revenue going forward.
The company has also launched a number of data plans that are
gaining popularity among customers.
We also appreciate the various strategic initiatives that
Verizon has taken over the last two years to enhance
profitability in the coming quarters. These include innovation
centers across Waltham, Massachusetts and San Francisco; Isis -
a mobile commerce platform launched in partnership with
AT&T and T-Mobile USA; and Converged solutions - an
agreement with the affiliates of
Comcast Corporation
(
CMCSA
-
Analyst Report
) ,
Time Warner Cable
(
TWX
-
Analyst Report
) , Bright House Networks and Cox Communications Inc.
Apart from these, acquisition of spectrum licenses, commitment
to enhance the performance of the wireline segment and healthy
financial position will work in favor of the New York
headquartered company.
Despite the positives, we prefer to stay on the sidelines owing
to Verizon's soft fourth quarter results plus risks factors
including persistent erosion in access lines, uncertain returns
from investments, iPhone subsidies, and intense competition
from cable companies and other alternative service providers.
For the first and second quarters of 2013, the Zacks Consensus
Estimates for earnings are 65 cents and 72 cents per share,
respectively. This reflects respective year-over-year growth of
10.64% and 12.93%.
Other Stocks
Foreign telecom firms that are performing impressively are
French giant
France T
(
FTE
-
Analyst Report
) and Canada-based
Rogers Communications Inc.
(
RCI
-
Analyst Report
) . Both the stocks carry Zacks Rank #2 (Buy).
COMCAST CORP A (CMCSA): Free Stock Analysis
Report
FRANCE TELE-ADR (FTE): Free Stock Analysis
Report
GOOGLE INC-CL A (GOOG): Free Stock Analysis
Report
ROGERS COMM CLB (RCI): Free Stock Analysis
Report
TIME WARNER INC (TWX): Free Stock Analysis
Report
VERIZON COMM (VZ): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment
Research