Verizon shares fall to 11-year low after Q3 print

The news shaping the markets today

Russia fired missiles into the Ukrainian-held Mykolaiv, which hit an apartment block. The US dollar index traded higher this morning on rising geopolitical tensions.

China’s retail trade grew by 2.5% year-over-year in September, slowing from the 5.4% gain recorded in the previous month. The latest reading also missed market estimates of 3.3%, which exerted pressure on the CNY/USD forex pair.

Japan’s manufacturing PMI fell to 50.7 in October, from a final reading of 50.8 in September, which sent the JPY/USD pair lower in forex trading this morning.

Australia’s services PMI slipped to 49 in October, from 50.6 in the previous month. The recent reading signalled the first contraction in the country’s service sector since January and exerted pressure on the AUD/USD forex pair.

Canada’s new home prices fell by 0.1% in September, recording the first monthly decline since November. The news sent the CAD/USD pair lower in forex trading this morning.

What’s happening: Shares of Verizon Communications moved lower on Friday, despite the company reporting upbeat earnings for its third quarter.

What happened: The largest US wireless carrier had raised prices last quarter, which resulted in the company adding fewer-than-expected wireless subscribers during the same period.

The company’s customers switched to cheaper plans from fast-growing peers.

How were the results: The New York-based company reported a decline in earnings for the three months ending in September, but the figure still exceeded market views.

• Group revenues grew by 4% to $34.2 billion, beating the consensus estimate of $33.78 billion.
• Adjusted non-GAAP earnings contracted by 7% year-over-year to $1.32 per share, surpassing the Street expectations of $1.29 per share.

Why it matters: The US telecom market has become increasingly competitive after Verizon and AT&T sold their media businesses. T-Mobile also completed its merger with Sprint, becoming a company focused on wireless.

Despite an increase in investment in the adoption of 5G infrastructure, telecom companies were forced to offer their plans at affordable prices to customers due to people lowering their spending in the face of high inflation. Against this backdrop, Verizon’s plans became the most expensive among rivals.

For the quarter, Verizon announced net post-paid phone subscriber additions of merely 8,000, sharply below market expectations of 35,400. The subscriber additions were driven by its business segment, which added 197,000 subscribers during the quarter. However, Verizon’s consumer business lost 189,000 monthly bill-paying phone subscribers due to increased charges to its already-pricey plans.

The higher plan prices resulted in disconnections, and the company’s finance chief Matt Ellis warned that the situation could continue in the quarter.

Meanwhile, rival AT&T added 708,000 wireless post-paid phone subscribers during the quarter.

Management reiterated its guidance for wireless revenue growth of 8.5%-9.5% and adjusted earnings of $5.10-$5.25 per share for 2022.

How shares responded: Following the release of quarterly results, Verizon’s shares fell as much as 5.3% to $35.03, reaching the weakest level since September 2011. The stock declined by 4.5% to close at $35.35 on Friday and has lost around 32% over the past six months.

What to watch: Markets will keep an eye on the rising competition in the wireless business. Rising costs due to spending on 5G infra will also remain one of the major concerns for investors.

The markets today

European stocks will be in focus today ahead of a basket of economic reports

Context: European markets settled lower on Friday amid the political chaos in Britain.

Details: Markets digested some major changes in the UK last week, with the Truss government taking a U-turn on its fiscal policy. UK’s Prime Minister Liz Truss finally announced her resignation only six weeks after her appointment, after the government’s economic programme resulted in a sharp sell-off in the country’s financial markets.

Investors were also concerned as European Union leaders continued to discuss ways to tackle the region’s energy crisis. The consumer confidence indicator in the Eurozone rose to -27.6 in October, from a record low of -28.8 in September, but remained negative.

The STOXX Europe 600 index closed down 0.62% at 396.29 on Friday, with retail stocks down around 3% and most sectors settling in the negative territory. France’s CAC 40 fell 0.85%, while Germany’s DAX 40 index declined 0.29%, with construction and telecom shares recording the biggest losses.

London’s FTSE 100 bucked the overall market trend, gaining 0.37%. However, retailers came under pressure on Friday after data showed the country’s retail sales falling by a higher-than-expected 1.4% in September.

What to watch: Investors await the release of economic data on services PMI, manufacturing PMI and composite PMI from the Eurozone today. The S&P Global Eurozone manufacturing PMI, which came in at 48.4 in September, is expected to decline to 47.8 in October. The services PMI is projected to decline to 48.4, from 48.8 in the previous month, while the composite PMI is expected to fall to 47.7, from 48.1 in the prior month.

Other Markets: US indices closed higher on Friday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 2.47%, 2.37% and 2.39%, respectively.

Support & resistances for today

Market snapshot

What else to watch today

France’s services PMI, manufacturing PMI and composite PMI, Germany’s services PMI, manufacturing PMI and composite PMI, UK’s services PMI, manufacturing PMI and composite PMI, Mexico’s inflation, Brazil’s current account, foreign direct investment and Central Bank of Brazil’s focus market readout, Canada’s manufacturing sales, US Chicago Fed National Activity Index, services PMI, manufacturing PMI and composite PMI, China’s average new home prices, GDP, industrial production, retail trade, fixed-asset investment, unemployment rate and balance of trade, as well as Indonesia’s foreign direct investment.