Verizon Earnings Preview: EPS, Revenue Growth Expected

Verizon Communications

, shares of which have dropped about six percent in the past week and a half as the Sprint Nextel

buyout played out, is scheduled to report its third-quarter 2012 results Thursday, October 18, before the opening bell. Investors will be looking to see, among other things, how much of an impact the shortage of iPhone 5s had on results.

Analysts on average predict that Verizon will report that revenue rose 3.9 percent year-over-year to $28.99 billion. Per-share earnings are expected to come to $0.65 for the quarter, compared with $0.64 in the second quarter, but up from $0.56 per share in third quarter of last year. The current consensus EPS estimate has slipped in the past 60 days from $0.68. Consensus analyst estimates have come within a penny or two of actual EPS results in the past eight quarters. Verizon attributed double-digit earnings growth and strong operating cash flow in the second quarter to record-high margins at Verizon Wireless and continued increases in revenue from FiOS fiber-optic services and strategic business services. New subscriber additions exceeded Wall Street expectations. Verizon affirmed its full-year outlook. But shares declined nearly two percent in the days after the second-quarter report. Both EPS and revenue are expected to increase year-over-year in the current quarter. So far, the full year forecast has EPS about 13 percent higher year-over-year and revenue up about four percent.

New York-based Verizon Communications is a global broadband and telecommunications company that serves more than 94 million retail customers. It is a component of both the S&P 500 and the Dow Jones Industrial Average, and its market capitalization is more than $125 billion. The company was founded in 1983, and Lowell McAdam has been the chief executive since July 2011. Competitors include AT&T

and Sprint Nextel. The former is expected to post flat EPS and revenue when it reports third-quarter results on October 23. The latter is expected to report a wider net loss than a year ago, though with revenue up more than five percent year-over-year. Sprint just agreed to be bought out by Japanese telecom SoftBank. During the three months that ended in September, Verizon won regulatory approval for a spectrum deal with Comcast

, boosted its dividend, reached a tentative contract with labor unions, settled a suit with TiVo

and announced a partnership with RedBox to stream movies.

Verizon's long-term EPS growth forecast is more than nine percent. Its PEG ratio is lower than the industry average, but its P/E ratio is higher. The return on equity is higher than that of AT&T and Sprint, and the dividend yield is about 4.5 percent. Short interest is less than two percent of the float. But only 14 of 40 analysts surveyed by Thomson/First Call who follow the stock recommend buying shares. The analysts' mean price target signals only about one percent potential upside. An earnings beat or rosy guidance could prompt increased price targets. The stock is up more than 16 percent year to date despite the recent pullback from a multiyear high. But the share price is has slipped below the 200-day moving average. Over the past six months, the stock's performance has been largely in line with that of AT&T, but it has outperformed the broader markets.