Verizon (VZ) Dials Up Another EPS Beat As 5g Rollout Gains Steam, But Growth Still Underwhelms
2:58 pm Tuesday, January 25th, 2022
Verizon’s (NYSE:VZ) consistency is on display this morning after the telecom giant reported better-than-expected 4Q21 results, including its eighth straight quarterly EPS beat. The upside results can be linked to VZ’s aggressive push to secure the country’s most extensive 5G coverage. After VZ shelled out a whopping $45 bln in last February’s C-Band auction, it’s vital that the company shows a solid return on its investment. With more than one third of VZ’s wireless customers now having 5G-capable devices, it’s evident that its massive bet is paying dividends.
However, whether those dividends, including the addition of 558,000 postpaid wireless phone subscribers in Q4, are worth the steep price is still up for debate. Notably, rival AT&T (T) spent about half as much as VZ in that auction, but it added 880,000 postpaid phone subscribers in Q4.
An argument can be made that VZ’s wireless phone subscription adds are worth more than AT&T’s due to VZ’s premium 5G service. The problem with that assertion, though, is that VZ’s adjusted EBITDA declined in both its consumer and business segments, dropping 120 bps and 110 bps, respectively, on a yr/yr basis. Meanwhile, the company’s long-term debt ballooned to $143.4 bln from $123.2 bln in the year-earlier period.
More time will be needed to fully decipher whether VZ is generating enough bang for its buck. When AT&T issues its full Q4 report tomorrow morning (having already provided some Q4 metrics on January 5), another data point in this competitive landscape will be revealed. For now, what we can definitively say is that VZ is performing reasonably well, as illustrated by these points:
In the Consumer segment, VZ reported 336,000 phone net additions, up from 267,000 in 3Q21.
While the Business segment experienced a 3% drop in total revenue due to legacy wireline declines, strength in small and medium sized businesses fueled the segment’s best quarterly net phone addition performance since the onset of the pandemic. For the quarter, the segment reported 222,000 phone net additions.
The work-from-home trend continues to support VZ’s Broadband segment, which added 106,000 net new customers, including 55,000 Fios Internet additions.
VZ provided upside EPS guidance of $5.40-5.55 for FY22, even as it projects $16.5-17.5 bln in capital spending.
Overall, VZ registered another solid performance. There is room for some disappointment, though, because the staggering amount of capital it’s deploying into 5G infrastructure has yet to produce meaningfully higher adjusted EBITDA (flat) or revenue (+1.8%) growth.
