Verizon Issues Q4 Print, 2019 Outlook: 4 Analyst Takes

Telecommunications giant Verizon Communications Inc. VZ reported Tuesday with fourth-quarter results that fell short of expectations on the revenue line, but subscriber growth was strong. 

The Analysts

• Wells Fargo's Jennifer Fritzsche maintains an Outperform rating on Verizon with an unchanged $60 price target.
• Morgan Stanley's Simon Flannery maintains a Equal-weight with an unchanged $58 price target.
• Raymond James' Frank Louthan IV maintains at Market Perform.
• Tigress Financial Partners' Ivan Feinseth.

Wells Fargo: 'Far More Favorable' Than It Appears

Verizon pre-announced certain Q4 metrics in early January, so the subscriber growth announced Tuesday morning was already factored into the stock ahead of the print, Fritzsche said in a Tuesday note.

Instead, investors focused on the negative readouts in the print, including a revenue miss and wireline margin concerns, the analyst said. Yet when removing several one-time items on a like-for-like basis, service revenue was 2.5-percent higher and wireline margins were negatively impacted by a compensation true-up and inventory write-off, he said.

As such, the earnings report appears to be "far more favorable" when extracting non-recurring events, according to Wells Fargo. 

Related Link: Guggenheim: Wireless Carrier Spending On 5G A Bullish Signal For Tower Companies

Morgan Stanley: Looking Forward To Analyst Day

Verizon reported a solid quarter, but management's 2019 outlook was mixed, Flannery said in a Wednesday note.

The outlook for 2019 could improve when management hosts an analyst day presentation Feb. 21, which could include a more detailed plan on how the company will expand into 5G, the analyst said. Until then, Verizon's stock is likely to remain rangebound as the unclear monetization benefits of 5G are countered with the potential for large spectrum purchases, he said. 

Raymond James: A Look At Valuation

Verizon's stock is trading at around 10.3 times estimated 2019 free cash flow per share, which is a discount to its historical multiple, Louthan said in a Tuesday note. While the stock also offers a 4.5-percent dividend yield, investors shouldn't be buyers, as the company is showing minimal top-line growth and an expansion into 5G won't be a material contributor until next year, he said. 

Tigress Financial: Buy AT&T Instead

Verizon's earnings report shows the company continues to suffer from the competitive landscape, as evidenced by a wireless services revenue miss despite better-than-expected subscriber growth, Feinseth said in his daily newsletter.

Rival AT&T Inc. T looks more attractive from an investment standpoint given expectations that it will leverage the Warner Media acquisition, and the stock offers a superior dividend yield just shy of 7 percent, he said. 

Price Action

Verizon shares were up 1.05 percent at $53.84 at the time of publication Wednesday. 

Related Link: With Valuation Priced In, Morgan Stanley Downgrades Verizon

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