Verizon Communications Posts Better-Than-Expected Q3 Earnings; Target Price $63

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Verizon Communications Inc, a major U.S. telecommunications service provider, reported a better-than-expected profit in the third quarter, largely driven by solid demand for internet services and phones as most people worked remotely amid the COVID-19 pandemic.

Verizon reported EPS of $1.05, compared with $1.25 in third-quarter 2019. On an adjusted basis (non-GAAP), third-quarter 2020 EPS, excluding a special item, was $1.25, compared with adjusted EPS of $1.25 in third-quarter 2019. That higher than the market consensus of $1.22.

The company estimates that third-quarter 2020 EPS and adjusted EPS included about negative 5 cents of COVID-19-related net impacts. Total consolidated operating revenues in third-quarter 2020 fell 4.1% to $31.5 billion. This decline was due to lower customer activity and the timing of certain device launches.

Revenue in Verizon’s media unit, which includes TechCrunch, Yahoo and HuffPost, plunged 7.4% to $1.7 billion, but an increase of 21.2% from second-quarter 2020.

The company forecasts 2020 adjusted EPS growth of 0%-2%, improved from the previous prediction of -2% to 2%. Total wireless service revenue is expected to grow at least 2% in fourth-quarter 2020 compared to last year.

At the time of writing, Verizon Communications shares traded 0.17% lower at $57.15 on Wednesday; the stock is down about 7% so far this year.

Verizon Communications Stock Price Forecast

Eleven equity analysts forecast the average price in 12 months at $63.20 with a high forecast of $70.00 and a low forecast of $57.00. The average price target represents a 10.51% increase from the last price of $57.19. From those 11 equity analysts, five rated “Buy”, six rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave a base target price of $60 with a high of $71 under a bull scenario and $42 under the worst-case scenario. Bernstein raised their stock price forecast to $63 from $60. Royal Bank of Canada reiterated a “hold” rating and set a $57 target price on shares of Verizon Communications.

Several other analysts have also recently commented on the stock. Credit Suisse Group reiterated a “hold” rating and set a $61 target price on shares of Verizon Communications. Oppenheimer started coverage and set a “buy” rating and a $70 price objective on the stock. Argus upgraded shares from a “hold” rating to a “buy” rating and set a $68 price objective.

Analyst Comments

“Attractive business mix, as the wireless market leader. Wireless service revenue 70% of consolidated revenue, and wireless EBITDA ~85% of consolidated EBITDA. Dividend yield and potential buybacks provide some support, while the transition to 5G creates opportunities and risks, with mid-band spectrum needs in focus,” said Simon Flannery, equity analyst at Morgan Stanley.

Upside and Downside Risks

Upside: 1) Continued strength in wireless. 2) Rates remain lower for longer. 3) Defensive market. 4) Developments around mobile video, and internet of things – highlighted by Morgan Stanley.

Downside: 1) Rising interest rates make the dividend yield less attractive. 2) Competitive price pressure from wireless competitors. 3) Wireline business faces significant secular pressures. 4) Spectrum spend/M&A pressure Balance Sheet metrics.

Check out FX Empire’s earnings calendar

This article was originally posted on FX Empire


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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