Wall Street digests Verizon’s mixed Q2 report with concerns for growth (updated)

Verizon (NYSE:VZ) reported marginal topline growth and a bottom line that just matched consensus in its second-quarter results and reaffirmed its outlook, which indicated a stagnating business trend to Wall Street and raised concerns about growth for the top U.S. telecom firm.

Shares of the company slipped 6.7% as of 10 a.m. ET Monday, after the stock’s worst open since early October.

The company’s total revenue came in at $32.8B, which fell short of the average consensus estimate of $33.04B. Most revenue came from the Consumer side, helped by higher pricing, while revenue from Business fell during the quarter.

“Service revenue growth was primarily from aggressive pricing, and based on history, I worry this will translate to volume losses later in the year … And as Consumer’s wallets continue to get squeezed, I see a scenario in the back half of the year where Consumer stops growing, Business continues to decline, and the overall business starts to trend down,” Seeking Alpha analyst Michael Dion said in his initial reaction to the report.

On Verizon Business, Dion told Seeking Alpha that he was also “surprised” to see revenue and expenses declining.

“This (Business) has been repeatedly pitched by management as the growth business, and it doesn’t seem like they can get any traction. In a world of cybersecurity, AI, and 5G, Verizon has no excuse to be underperforming in this space,” he added.

For Wireless, the company’s retail postpaid net additions were 340,000, which included 148,000 postpaid phone subscribers. The total retail postpaid churn rate was 1.11% for Q2.

Subscriber additions in Broadband were 391,000, and in fixed wireless, they were 378,000. The company had a base of 11.5 million total broadband subscribers at the end of Q2, a 17.2% rise from a year ago.

For the three months ended June 30, the New York-based telecom giant earned net income of $4.7B or $1.09 per share, compared with $4.8B or $1.10 per share a year earlier. Excluding one-off items, it earned $1.15 per share, which was just in line with consensus.

For the remainder of the year, the company continues to expect adjusted EPS of $4.50 to $4.70 on wireless service revenue growth of 2% to 3.5%. The Seeking Alpha consensus estimate for 2024 EPS is $4.57, and for revenue it’s $135.46B.

Capital expenses for 2024 are forecast to be between $17B and $17.5B, with adjusted EBITDA growth of 1% to 3%.

Before the report, VZ stock was +10% YTD, while the S&P 500 Communication Services Index is nearly +22% so far this year.