Key Takeaways From Verizon's Q4 Earnings

Verizon ( VZ ) posted a relatively lackluster set of Q4 2016 results amid mounting competition in its core wireless business, with quarterly earnings coming in slightly below Wall Street estimates and revenues, adjusted for acquisitions and divestitures, declining by about 2.4% year-over-year. The carrier also struck a cautious tone with its 2017 outlook, projecting that revenues and earnings could remain flat year-over-year . Verizon's stock reacted negatively to the results, declining by over 4% in Tuesday's trading. Below we provide some of the key takeaways from the carrier's earnings release.

Trefis has a $56 price estimate for Verizon , which is about 10% ahead of the current market price. We will be updating our model to account for the earnings release and revised outlook.

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Verizon added a net total of 167k postpaid phone subscribers during Q4, as its smartphone gains more than made up for losses of feature phone subscribers. This figure is somewhat commendable, given that Sprint and T-Mobile have been offering increasingly compelling unlimited plans over Q4. However, Verizon's average revenue per account trended lower, amid migration of customers to un-subsidized pricing as well as migration of users to new pricing plans launched in mid-2016 that offered safety mode and data carryover. Roughly 67% of the carrier's post-paid base is now on un-subsidized pricing. Postpaid churn figures also trended higher, as customers who signed up for tablets promos two years ago rolled off their contracts. Verizon's wireless EBITDA margins declined on both a sequential and year-over-year basis, on account of higher equipment promotional activity over the holiday season.


The carrier's wireless business also had a relatively mixed quarter. The FiOS fiber optic broadband offering, which the carrier is banking on to drive its wireline operations in the long-term, posted net adds that were about 17% lower on a year-over-year basis. Verizon's overall broadband subscriber base also declined by about 0.6% year-over-year, amid continued attrition of high-speed internet subscribers and potential competition from cable operators such as Comcast ( CMCSA ), who have been posting strong broadband growth in recent quarters. However, wireline EBITDA margins improved by 430 basis points year-over-year, driven by a higher mix of FiOS customers as well as improved cost management.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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