Company Reports

Verizon’s first-quarter results largely met our expectations. Wireless revenue growth was robust, with recent price increases driving higher sales without spurring significantly higher customer defections. Cash flow was relatively weak, but the first quarter is typically seasonally soft and included a one-off pension contribution. Management also reiterated its 2024 forecast, which calls for free cash flow in the same range as 2023. We expect Verizon to make steady progress growing the business and repaying debt this year, and our fair value estimate remains $54 per share.

Verizon Communications is primarily focused on the wireless business, where it has taken steps to ensure it remains well positioned, building fiber deeper into major metro areas and acquiring wireless spectrum to increase network capacity and performance. While we expect growth will be very modest, we expect Verizon and its two primary wireless rivals will compete rationally, allowing each to generate consistent financial results in the coming years.

Verizon Communications is primarily focused on the wireless business, where it has taken steps to ensure it remains well positioned, building fiber deeper into major metro areas and acquiring huge chunks of wireless spectrum to increase network capacity and performance. We believe these resources will allow Verizon to deliver consistent financial results in the coming years. However, we expect growth will be very modest, as the wireless business is very mature, and AT&T and T-Mobile offer comparable services at similar prices. We expect Verizon and its two primary rivals will compete rationally, each attracting a similar number of customers quarter in and quarter out, diminishing Verizon’s market share lead over time.

Verizon delivered on nearly all fronts during the fourth quarter. Free cash flow hit $18.7 billion for the year, up more than 30% versus 2022 and well ahead of management expectations. The firm added 449,000 net postpaid phone customers in the quarter, its best performance in two years. Management warned that customer growth may moderate following another round of price increases on older rate plans that will take effect in March. However, it still expects to add both consumer and business phone customers during the year, which we believe reflects solid pricing discipline while messaging that it won’t allow rivals to pick off accounts with unduly aggressive promotions. We remain encouraged by the competitive balance in the wireless industry, and we are maintaining our $54 Verizon fair value estimate.

Verizon Communications is primarily focused on the wireless business, where it has taken steps to ensure it remains well positioned, building fiber deeper into major metro areas, acquiring a huge chunk of spectrum, and ramping up spending to put that spectrum to use. We believe Verizon will deliver consistent results, but growth will likely be very modest. Rivals AT&T and T-Mobile offer comparable services and sell at similar prices, which we expect will diminish Verizon’s market share lead over time. We don’t expect liabilities associated with lead-sheathed cabling will overly tax Verizon’s ability to generate steady cash flow, but this matter creates additional uncertainty that is difficult to quantify.

Cash flow was the key takeaway in Verizon's third-quarter results. The firm has already generated more cash in 2023 than in 2022 and increased its full-year forecast to more than $18 billion from at least $17 billion. Verizon clearly expects free cash flow to expand in 2024 despite higher interest and tax payments thanks to modest growth and another step down in network investment. We continue to believe the improving competitive balance in the wireless industry will allow the three major U.S. carriers to improve profitability in the years ahead. We are maintaining our $54 fair value estimate and view Verizon shares as very attractive.

While Verizon Communications delivered solid second-quarter results, investors remain focused on its exposure to lead-sheathed cabling. The firm didn’t provide much additional information or answer questions on the matter, saying it will share details as its own investigation proceeds. We still don’t expect Verizon will face significant lead liabilities, but we have increased our capital spending estimates modestly beyond this year. We suspect Verizon and its peers will ultimately remove some lead-sheathed cabling that otherwise would have remained in place. This change and other adjustments to our forecasts reduce our fair value estimate to $54 per share from $57. We continue to believe the shares are very attractive.

Verizon Communications is primarily focused on the wireless business, where it has taken steps to ensure it remains well positioned, building fiber deeper into major metro areas, acquiring a huge chunk of spectrum, and ramping up spending to put that spectrum to use. We believe Verizon will deliver consistent results, but growth will likely be very modest. Rivals AT&T and T-Mobile offer comparable services and sell at similar prices, which we expect will diminish Verizon’s market share lead over time. We don’t expect liabilities associated with lead-sheathed cabling will overly tax Verizon’s ability to generate steady cash flow, but this matter creates additional uncertainty that is difficult to quantify.

A series of articles in The Wall Street Journal concerning lead in cable sheathing dealt yet another blow to investor sentiment around telecom stocks. An analyst downgrade of AT&T citing potential legal liability, among other issues, further punished stocks across the industry Friday morning. While this situation warrants watching, we don’t expect the telecom industry will bear substantial legal liability. We believe AT&T and Verizon shares are very attractive at current prices.

Amazon’s potential entrance into the wireless resale business, as Bloomberg News has reported, reflects a risk to our view of the wireless industry. However, we expect the carriers will remain rational, and our fair value estimates on Verizon, AT&T, T-Mobile, and Dish Network are unchanged.

Verizon is primarily focused on the wireless business, where the firm has taken steps to ensure it remains well positioned, building fiber deeper into major metro areas, acquiring a huge chunk of spectrum in 2021, and ramping up spending to put that spectrum to use. We believe Verizon will deliver consistent results over the long term, but growth will likely be very modest. Rivals AT&T and T-Mobile offer comparable services and sell at similar prices, which we expect will diminish Verizon’s market share lead over time.

Verizon delivered underwhelming first-quarter results, with an unfavorable balance between new customer wins and customer retention. Cash flow growth remains management’s top priority, but we believe the firm has still placed too much emphasis on customer growth, at least in its communication with investors. We are maintaining our $57 fair value estimate, which assumes Verizon accepts its fate as one of three strong but relatively undifferentiated U.S. wireless carriers. We believe the shares remain attractive.

Verizon’s fourth-quarter results and 2023 outlook fell modestly short of our expectations. We’ve trimmed our revenue and margin forecasts, moving our fair value estimate down to $57 from $59. We continue to believe the shares are very attractive, trading at around 10 times our 2023 free cash flow expectation. We expect the firm can move margins and cash flow higher beyond this year as network projects are completed and the promotional environment eases somewhat.

Verizon is primarily focused on the wireless business, where the firm has taken steps to ensure it remains well positioned, building fiber deeper into major metro areas, acquiring a huge chunk of spectrum in 2021, and ramping up spending to put that spectrum to use. We believe Verizon will deliver consistent results over the long term, but growth will likely be very modest. Rivals AT&T and T-Mobile offer comparable services and sell at similar prices, which we expect will diminish Verizon’s market share lead over time.

The big three U.S. wireless carriers struck a generally optimistic tone at an investor conference this week. We expect Verizon, AT&T, and T-Mobile will post steady results for the fourth quarter, with modest industry growth and expanding cash flows continuing into 2023. We believe the three carriers’ shares are undervalued, with Verizon trading at the steepest discount to our fair value estimate.

Sentiment around the U.S. wireless industry, especially Verizon, has turned negative recently. We suspect industry bears hold two key contentions: First, the carriers will perpetually spend egregiously on their networks, primarily buying wireless spectrum whenever the government makes more available. Second, in an extremely mature market, these firms will beat each other up seeking whatever growth remains, punishing revenue and margins. As such, balance sheets will continually need repair and cash available for shareholders will be increasingly limited.

We continue to believe the market is overly focused on Verizon’s struggle to add postpaid consumer wireless customers in recent quarters. The firm is the share leader in this category, which creates a headwind in an environment where the carriers’ networks look increasingly alike and rivals are marketing with a similar level of aggression. This dynamic is especially challenging following a price increase, as Verizon instituted earlier this year, but taking up pricing is important for the long-term health of the firm and the industry. We are maintaining our $59 fair value estimate and now believe the shares are highly attractive.

Verizon is primarily focused on the wireless business, where the firm has taken steps to ensure it remains well positioned in the traditional wireless business, building fiber deeper into major metro areas, acquiring a huge chunk of spectrum in 2021, and ramping up spending to put that spectrum to use. We believe Verizon will deliver consistent results over the long term, but growth will likely be modest. Rivals AT&T and T-Mobile offer comparable services and sell at similar prices, which we expect will diminish Verizon's market share lead over time.

Verizon is primarily focused on the wireless business, where the firm has taken steps to ensure it remains well positioned in the traditional wireless business, building fiber deeper into major metro areas, acquiring a huge chunk of spectrum in 2021, and ramping up spending to put that spectrum to use. We believe Verizon will deliver consistent results over the long term, but growth will likely be modest. Rivals AT&T and T-Mobile offer comparable services and sell at similar prices, which we expect will diminish Verizon's market share lead over time.

Verizon is primarily focused on the wireless business, where the firm has taken steps to ensure it remains well positioned in the traditional wireless business, building fiber deeper into major metro areas, acquiring a huge chunk of spectrum in 2021, and ramping up spending to put that spectrum to use. We believe Verizon will deliver consistent results over the long term, but growth will likely be modest. Rivals AT&T and T-Mobile offer comparable services and sell at similar prices, which we expect will diminish Verizon's market share lead over time.