Verizon and AT&T Q2 earnings on deck: Focus on subscribers, profit

When Verizon (NYSE:VZ) and AT&T (NYSE:T) report second-quarter results this week, investors will focus on improvement in subscribers’ figures along with profit for the U.S. telecom firms.

Wall Street expects the New York-based Verizon to post EPS of $1.15, implying a fall of 5%, while revenue is expected to rise just 1.3% at $33.04 billion.

Verizon’s strategy of offering flexible price plans and streaming bundles to customers has helped it to lower subscribers’ losses in a market that is where people are cautious about spending money. The company, in April, posted first-quarter earnings that topped estimates, aided by growth in its wireless unit.

“The company benefits from strong customer loyalty, higher adoption of premium plans, and reduced churn in C-band markets,” pointed out a recent Seeking Alpha analysis.

Goldman Sachs analysts believe the U.S. telecom industry is in a state of transformation.

For Verizon, Goldman Sachs said the largest U.S. mobile network operator can deliver a sustained return to revenue, EBITDA, and free cash flow growth over the coming 18 months, with potential for a buyback in 2025, as a result of the favorable backdrop.

Similarly, the brokerage believes AT&T’s fiber initiative can reverse the declines in its broadband business, and steady wireless growth should help drive solid revenue and EBITDA growth through 2026. Analysts were also positive on T-Mobile (TMUS).

Rival AT&T (T) is expected to post Q2 EPS of $0.57, implying a fall of over 9%. Revenue is expected to be $29.99 billion. The company’s first-quarter profit beat estimates, and it added more postpaid phone subscribers than expected.

Investors will also focus on free cash flow- an important metric to help determine dividends for both companies during the quarter.

Over the last two years, Verizon has beaten EPS estimates 75% of the time and has beaten revenue estimates 50% of the time.

Meanwhile, AT&T has beaten EPS estimates 88% of the time and has beaten revenue estimates 50% of the time.

Verizon EPS estimates have been revised upward five times, compared to seven downward revisions over the last three months. Revenue estimates have seen four upward revisions versus six downward moves.

In the case of Dallas, Texas-based AT&T, EPS estimates have seen six upward revisions and four downward revisions, while revenue estimates have seen no upward revisions, compared to 11 downward moves.

Both Seeking Alpha and Wall Street analysts are bullish and rated Verizon and AT&T a Buy. Seeking Alpha’s Quant ratings consider the stocks a Hold.

Verizon stock has gained over 11% so far this year, while AT&T rose nearly 14%. This is in comparison to the over 17% rise in the broader S&P500 Index.