Citi Lowers Verizon's Estimates

In a research report released this morning, Citi has lowered Verizon Communications' VZ 1Q/12 EPS to reflect a lower wireline margin. According to Citi, “We have adjusted our 1Q estimates to reflect a lower wireline OIBDA margin of 22.7% (from 23.5% previously), which incorporates some negative seasonality of payroll and benefit costs. Verizon has yet to agree to a new contract with its Unions that we believe is likely to delay the prospects to improve the efficiency of its cost structure. We believe Verizon's lower wireline margin relative to most of its peers represents an opportunity for improvement partly by increasing FiOS scale with time and partly by right-sizing the spend on overhead, support, benefits, and its legacy plant.” Citi maintains its Neural rating and $39 PT on Verizon, which closed Friday at $39.42.