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Verizon (VZ) Beats on Q1 Earnings, Lags on Revenues - Analyst Blog

Verizon Communications Inc.VZ reported mixed financial numbers in the first quarter of 2015. Earnings came in above the Zacks Consensus Estimate wherein revenues missed the same. Verizon currently carries a Zacks Rank #3 (Hold).

Verizon reported earnings per share of $1.02, beating the Zacks Consensus Estimate of $0.95. Quarterly net income came in at $4,338 million compared with a net income of $5,986 million in the year-ago quarter. However, quarterly net income decreased 27.5% year over year.

Quarterly total revenue increased 3.8% year over year to $31,984 million but missed the Zacks Consensus Estimate of $32,284 million.

Total operating expenses in the reported quarter was $24,024 million, up 1.5% year over year. Operating income stood at $7,960 million compared with $7,160 million in the year-ago quarter. Quarterly adjusted EBITDA margin in the reported quarter was 37.4% in comparison with 36.7% in the first quarter of 2014.

Cash Flow & Liquidity

During the first quarter of 2015, Verizon generated $10,169 million of cash from operations compared with $7,139 million in the first quarter of 2014. Free cash flow at the end of the first quarter was $6,504 million compared with $2,989 million a year ago.

At the end of first-quarter 2015, Verizon had $4,933 million of cash and short-term investments and $108,949 million of long-term debt compared with $11,153 million of cash and short-term investments and $110,536 million of debt outstanding at the end of 2013. The debt-to-capitalization ratio was 0.91 at the end of the first quarter of 2015 against 0.89 at the end of 2014.

Wireless Segment

Total revenue at the segment was $22,328 million, up 6.9% year over year. Retail Service revenues were down 2.6% to $17,143 million. Other Service revenues were $771 million, up 4.0%. Equipment revenues increased 80.4% to $3,373 million and Other revenues were up 1.9% to $1,041 million.

Operating expenses increased 7.1% to $14,518 million. Operating income improved 7.1% to $7,810 million. Quarterly operating margin came in at 35%, flat year over year. Segment EBITDA increased 6.6% to $10,000 million. EBITDA margin was 44.8% compared with 44.9% in the prior-year quarter.

At the end of the first quarter, Verizon had 108.582 million retail subscribers, up 5.1% year over year. Out of the total, retail postpaid subscriber count stood at 102.637 million, up 5.5% and Retail prepaid subscriber count was 5.945 million, down 1.8%. During the reported quarter, the company added 565,000 postpaid customers (up 4.8% year over year) while prepaid customers decreased by 0.188 million.

Quarterly retail postpaid churn rate was 1.03% compared with 1.07% in the year-ago quarter whereas total retail churn rate was 1.33% against 1.37% in the year-ago quarter. Retail postpaid average revenue per account (ARPA) dropped 2.2% to $156.14

In the reported quarter, 91.4% of the total numbers of activated phones were smartphones compared with 90.1% in the prior-year quarter. Strong sale of Apple Inc.'s AAPL iPAD and increased adoption of Google Inc.'s GOOG Android-based smartphones and Microsoft Corp. MSFT developed Windows smartphones also drove subscriber numbers.

Wireline Segment

Total revenue at the segment was $9,469 million, down 2% year over year. Consumer retail revenues were up 4% to $3,992 million. Small business revenues were $600 million, down 3.8%. Strategic services revenues declined 1.1% to $2,048 million. Core revenues were down 13% to $1,215 million. Global wholesale revenues decreased 3.7% to $1,524 million and Other revenues declined 37.5% to $90 million.

Operating expenses decreased 4.8% to $9,064 millionMeanwhile, operating income jumped a whopping 187.2% to $405 million. Quarterly operating margin came in at 4.3% against 1.5% in the year-ago quarter. Segment EBITDA decreased by 1.1% to $2,151 million. EBITDA margin stood at 22.7% compared with 22.5% in the year-ago quarter.

At the end of the first quarter, FiOS video subscriber base was 5.739 million (up 7.9% year over year), FiOS Internet subscriber count stood at 6.749 million (up 9.4%) and FiOS digital video residence connections were 4.661 million (up 7.1%). In the reported quarter, Verizon added a net 90,000 FiOS video subscribers, 133,000 FiOS Internet subscribers and 59,000 FiOS digital video residence connections.

High-speed Internet connection dropped 12.7% to 2.497 million, total broadband connections grew 2.4% to 9.246 million, Primary residence switched access connections decreased 13.3% to 5.397 million and Primary residence connections fell 4.9% to 10.058 million. Total retail residence voice connections dropped 5.3% to 10.457 million and total voice connections decreased 6.1% to 19.475 million.

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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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