Verizon's Results Suggest 'Cord Cutting Is Actually Starting To Accelerate'

Verizon Communications Inc. VZ reported better than expected second-quarter numbers before market opening on Tuesday. EPS of $1.04 came above analysts' expectations and the EPS it declared for the same quarter last year of $1.01.

Craig Moffett, MoffettNathanson analyst, was on CNBC Tuesday to weigh in on Verizon's earnings.

Be Careful With Accounting Transition

"It's doubly difficult now because the industry is going through this accounting transition – EIP accounting or selling phones rather than subsidizing them," Moffett said. "And that's like this giant asterisk like on Barry Bonds' home runs that says you have to be careful with all of these earnings and EBITDA numbers because they are all inflated by the accounting change."

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He went on, "So, for earnings for example, it looks like they beat by $0.03 – $1.04 instead of $1.01 – but they got $0.12 out of the accounting change. Last year, they got $0.07 out of the accounting change; so, about $0.05 of that is the increased reliance on this accounting and it just makes these things very complicated."

Cord Cutting

On the slowness in net addition to company's FiOS services, Moffett said, "The FiOS numbers are light; both broadband numbers and video numbers are a little light. Hard to say what that means yet. The second quarter is always a weak number seasonally, but the numbers are well below estimates.

"And suggesting that, as we have feared, we could be seeing something industry-wide here where cord cutting is actually starting to accelerate a bit. It's much too early to say that just based on just the first company of the quarter reporting, but we will look at that for the whole industry," Moffett concluded.