On Mar 5, we maintained our Neutral recommendation on
Verizon Communications Inc.
) , 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).
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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
) 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
Time Warner Cable
) , 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
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%.
Foreign telecom firms that are performing impressively are
) and Canada-based
Rogers Communications Inc.
) . Both the stocks carry Zacks Rank #2 (Buy).