Key Points
Following a challenging period, Verizon impressed with another strong quarter of subscriber growth.
The telecom giant has a big opportunity to sell bundled services following its acquisition of Frontier.
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Verizon Communications' (NYSE: VZ) shift in strategy last fall once again showed it was paying dividends in Q1, with another solid quarter of subscriber growth. At the time, the company's new CEO said it would move from a technology-centric approach to a customer-focused one and that it would no longer be a wireless subscriber loser.
Another quarter of strong subscriber growth
During the quarter, Verizon added 55,000 postpaid phone subscriptions. It was the first time the company added subscribers during the first quarter since 2013. It also added 341,000 broadband net additions, including 214,000 fixed wireless subscriptions and 127,000 fiber households.
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Verizon's overall revenue increased by 2.9% year over year to $34.4 billion, with service revenue rising 2.4% to $28.8 billion and wireless equipment revenue jumping 5.2% to $5.7 billion.
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Consumer revenue rose by 3.3% year over year to $26.5 billion, with service revenue up 2%. The company's business unit was solid, with revenue up by 1.8% year over year to $7.4 billion. Overall adjusted earnings per share (EPS) climbed 7.6% to $1.28, while earnings before interest, taxes, depreciation, and amortization (EBITDA) grew 6.7% to $13.4 billion.
Looking ahead, Verizon expects to hit the high end of its prior guidance of adding between 750,000 to 1 million postpaid phone subscribers for the year. It continues to expect mobility and broadband service revenue to rise between 2% to 3%. Meanwhile, it slightly raised its adjusted EPS guidance from a range of $4.90 and $4.95 to a new range of $4.95 to $4.99, representing 5% to 6% growth.
Is the stock a buy?
Verizon's new customer-focused strategy is paying off, and it has strong cross-sell and bundling opportunities ahead following its recent acquisition of Frontier Communications earlier this year. It said that only about 20% of its customers have both wireless and broadband subscriptions, so this is a big opportunity in the years ahead. Meanwhile, it's also leaning into artificial intelligence to offer tailored customer offerings that help attract new customers and improve retention.
One of the big reasons investors own Verizon is its dividend and the stock's 6% yield. This looks to be in good shape, with its unsecured leverage (net unsecured net/adjusted EBITDA) between 2 times and 2.25x, and it is set to generate $21.5 billion in free cash flow this year, which is well above the approximately $12 billion in dividends it will pay out this year.
Verizon stock has a forward price-to-earnings (P/E) ratio of 9.6 based on 2026 earnings estimates. This is a dividend stock that income-oriented investors should want to own.
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Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool recommends Verizon Communications. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
