22 April 2021

Verizon Shares Slide Even After Upbeat Profit

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What’s happening: Shares of Verizon Communications closed slightly lower on Wednesday, even as the company reported its first-quarter sales and earnings ahead of expectations.

What happened: Verizon reported a strong start to the year, with a solid operational performance highlighted by growth in wireless service and wireless equipment revenues.

Investors grew concerned, however, about the company losing wireless subscribers in the face of stiff competition from AT&T and T-Mobile US.

How were the results: The biggest US wireless company reported growth in sales and earnings for the first quarter, with both metrics beating market views.

  • Total operating revenues grew around 4% to $32.9 billion, surpassing the consensus estimate of $32.46 billion.
  • Adjusted earnings came in at $1.31 per share, also topped Street expectations of $1.29 per share.

Why it matters: Verizon reported 4.7% growth in consumer revenue to $22.8 billion, driven by an increase in phone activations, while consumer wireless equipment sales climbed 24.1% to $4.2 billion.

Although Verizon’s wireless service revenue grew 2.4% to $16.7 billion, the company recorded 178,000 net losses in wireless post-paid phone subscribers in the quarter. Analysts had been expecting a decline, but to a lower extent of 121,700 subscribers.

Verizon Communications has been struggling to catch up with rivals AT&T and T-Mobile US to add more 5G subscribers. With customers looking for the best option for 5G services, the telecom majors are investing heavily into upgrading their current networks.

Verizon said that its efforts to expand 5G networks to more regions could result in revenue growth doubling to 4% by 2024. The company has, however, adopted a measured approach to customer acquisition compared to AT&T and T-Mobile US, which are offering free phones to customers.

CFO Matt Ellis also indicated that the company had witnessed a decline in store traffic in March.

Management projected earnings of between $5.00 and $5.15 per share for fiscal 2021, versus market expectations of $5.08 a share.

How shares responded: Verizon’s shares slipped 0.4% to close at $58.14 on Wednesday, after the company released its quarterly results. The stock has gained around 1.5% in the past three months.

What to watch: Investors will keep an eye on Verizon’s initiatives to curb net subscriber losses. Markets will also monitor the telecom giant’s efforts to expand its 5G network to more regions.

The Markets Today

     

European stocks will be in focus today ahead of the ECB’s interest rate decision.

Context: European stocks traded higher on Wednesday, with investors assessing earnings results and economic data, while digesting news of rising covid-19 infections around the world.

Details: Markets in Europe rebounded on Wednesday, after recording their worst downturn this year. Investor sentiment was lifted by optimism around the ongoing earnings season, which saw several companies release upbeat earnings. Markets particularly cheered the results reported by Ericsson, Kering, and ASML, all of which exceeded market views for profits in the first quarter.

On the economic data front, inflation rate in the UK edged higher to 0.7% in March, from February’s reading of 0.4%. The latest reading being lower than the projection of 0.8% sent London’s FTSE 100 index higher by 0.52% on Wednesday.

The pan-European Stoxx 600 index climbed 0.7% on Wednesday amid a volatile trading session. Retail stocks led the rally, while most sectors closed in the positive zone. The German DAX 30 added 0.44%, while the French 40 rose 0.74%.

Markets continued to monitor recent covid-19 developments around the world, which has been playing spoilsport to investor risk appetite. Investors are particularly concerned about the spike in infections in India, which reported its all-time high in new daily cases of around 294,000 on Tuesday.

What to watch: Markets await the ECB’s interest rate decision. The central bank is widely expected to keep rates unchanged at its latest meeting. Eurozone’s consumer confidence data will also remain in focus, after coming in at -10.8 in March.

Other Markets: US indices closed higher on Wednesday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.93%, 0.93% and 0.91%, respectively.

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Futures at 0400 (GMT)

What else to watch today

     

France’s manufacturing climate indicator and business climate indicator, Turkey’s consumer confidence index, foreign exchange reserves and Central Bank of Turkey’s meeting summary, Italy’s manufacturing sales, UK’s CBI industrial trends orders and gauge of manufacturing optimism, Mexico’s unemployment rate, Canada’s prices of new homes, Argentina's balance of trade and Economic activity index as well as the US initial jobless claims, Chicago Fed national activity index, existing home sales, EIA’s natural gas stocks, CB leading index and Kansas City Fed's manufacturing production index.

 

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