Summary: Verizon Communications raised its full-year adjusted profit and free cash flow forecasts after reporting stronger-than-expected wireless subscriber additions in the June quarter. The company credited recently launched simplified unlimited 5G plans, a new rewards program and a bundled wireless-home internet option for improving customer additions, while second-quarter revenue fell short of analyst estimates as equipment sales weakened.
Key points
- Verizon added 184,000 monthly-bill paying wireless subscribers in Q2, beating analyst expectations of 103,900 additions.
- The company raised its annual adjusted profit guidance to $4.99 to $5.04 per share and now sees free cash flow growing 9% to 10% for the year.
- Second-quarter revenue was $34.3 billion, below analysts' estimate of $35.16 billion, as equipment revenue declined due to customers holding on to devices longer.
Risks and uncertainties
- Revenue fell short of estimates in the quarter, primarily because equipment revenue declined amid slower phone upgrade activity.
- Customers retaining devices for longer periods reduced equipment sales, creating pressure on that revenue stream.
- Verizon has been trailing rivals in subscriber growth and is in the midst of a strategic transition to regain momentum, leaving some uncertainty about sustained gains.
Verizon said its new commercial approach - simplifying mobile offerings and introducing bundled and loyalty products - helped it add more wireless subscribers than analysts had expected for the quarter ending in June. The company reported a net gain of 184,000 monthly-bill paying wireless subscribers in the second quarter, surpassing the 103,900 additions forecast by analysts polled by FactSet.
Shares of the company traded higher in premarket action, up 3% on the news. The company is executing a strategic plan under new chief executive officer Dan Schulman that includes streamlined mobile pricing, a freshly launched loyalty initiative and bundled wireless-broadband services designed to deepen customer relationships and improve net additions after previously trailing competitors in subscriber growth.
In June, Verizon launched Simplicity, an unlimited wireless plan intended to replace a more complex lineup with clearer pricing; the plan includes access to the company’s fastest 5G network and mobile hotspot data. Verizon also rolled out Verizon One, which combines wireless service and home internet under a single monthly bill, reflecting a convergence strategy aimed at strengthening customer ties.
"We are gaining subscribers and earning long-term retention based on real value rather than subsidized promotions," CEO Schulman said.
Following the quarter, Verizon raised its annual adjusted earnings guidance to a range of $4.99 to $5.04 per share, up from prior guidance of $4.95 to $4.99. The company also now expects free cash flow to increase between 9% and 10% this year, an upward revision from its earlier estimate of about 7% or more.
Despite the subscriber momentum and stronger adjusted profit, total revenue for the second quarter came in at $34.3 billion, below analysts' consensus of $35.16 billion compiled by LSEG. The miss was driven in part by weaker equipment revenue as customers delayed phone upgrades and kept their devices for longer periods. Adjusted earnings per share were $1.30, which topped the $1.27 estimate, aided by cost controls and lower spending on device subsidies.
Note: This article reports the company’s results, guidance and executive comments as presented in the company’s public report for the quarter.