Piper Jaffray: Expect Downward Earnings Revisions On Verizon Due To iPhone

On Tuesday, January 25, Verizon VZ will report its 4Q10 earnings and host an investor day to discuss results and the company's strategic and financial outlook. Piper Jaffray believes this will include a discussion on the iPhone and the impact it could have on the company's fundamentals. Based on analysis, it is reducing its 2011 EPS estimate to $2.19 from $2.22. Piper looked at the potential revenues and costs associated with Verizon's iPhone launch and believe it could account for roughly $0.18 of negative earnings in 2011 relative to 2010. Specifically, it thinks wireline margin expansion could add nearly $0.08 in 2011 and wireless subscribers added in 2010 to add another $0.05 - $0.06. Given that Piper does not expect Sprint or T-Mobile to introduce the iPhone for at least 3 - 6 months, it raises its 2011 net add estimate to 3.550 million from 2.250 million. It is also reducing our 2011 EPS estimate to $2.19 from $2.22 to account for additional iPhone dilution. Piper Jaffray has a Neutral rating and $32 PT on VZ VZ closed Thursday at $34.61