Verizon Faces Challenges

by Warren Seah

Verizon Communications Inc. is facing a significant challenge as it strives to turn its business around. The telecommunications giant had planned to showcase the early results of its efforts to reignite the business, but a historical dilemma has emerged, casting a cloud over its progress.

In July, Verizon shares experienced a decline following reports from the Wall Street Journal regarding risks associated with legacy lead-clad cables used in the telecommunications industry. Investors are now eager to hear from Verizon’s management about the next steps and the potential costs involved.

Morgan Stanley analyst Simon Flannery believes that wireline carriers will need to provide investors and regulators with more information regarding their use of lead-sheathed cables in their networks. Analysts are hoping to gain a clearer understanding of each company’s exposure to these risks and the potential expenses associated with remediation.

Second Quarter Earnings Expectations

Analysts have provided their projections for Verizon’s second-quarter earnings:

Earnings: Analysts tracked by FactSet predict that Verizon earned $1.17 per share in adjusted earnings, a decrease from $1.31 per share in the previous year. The average estimate on Estimize, which aggregates projections from hedge funds and academics, is slightly higher at $1.18 per share.

Revenue: According to FactSet consensus, revenue for the quarter is expected to reach $33.3 billion, a slight decline from $33.8 billion in the same period last year. Estimize’s average projection stands at $33.4 billion.

Stock Movement: Verizon shares have experienced a decline after six of the company’s past seven earnings reports, with only a 2% gain following the most recent one.

Despite these challenges, Verizon remains determined to address the situation head-on and lay the groundwork for a successful turnaround.

Verizon Communications Inc. (VZ) has experienced a decline of 14% in its stock this year, while competitors AT&T Inc. (T) and T-Mobile US Inc. (TMUS) have seen their shares fall 19% and inch up 1% respectively. In comparison, the S&P 500 index has shown a 19% increase year-to-date.

According to FactSet, out of the 28 analysts covering Verizon’s stock, six have buy ratings, 20 have hold ratings, and two have sell ratings. The average price target for Verizon is $40.98, which is about 21% higher than the company’s Monday closing price.

Although Edward Jones analyst David Heger acknowledges Verizon’s efforts to appeal to wireless consumers through increased promotional activity and simplified pricing, he recently downgraded the stock due to concerns regarding competition from cable companies.

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