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Verizon Misses Earnings Estimate by Wide Margin, Still Stays Above Water

Verizon Misses Earnings Estimate by Wide Margin, Still Stays Above Water

Verizon Communications (NYSE: VZ) released its earnings Tuesday that came in well below expectations.

Analysts expected the New York telecommunications giant to round out the fourth quarter at $0.50 per share. However, the company finished with an EPS of just $0.38 - one cent below even the lowest estimate.

According to Verizon, the results were impacted negatively in two ways. First, there was a $1.48 hit to its EPS due to “Non-cash pension items” and “Non-operational debt retirement and other restructuring items.” Second, the company notes a drop of seven cents per share due to Hurricane Sandy.

Adding insult to injury, the company's fourth quarter performance was far below that of 2011. Fourth quarter EPS was down 27 percent year over year.

Also, annual EPS in 2011 was nearly triple that of 2012. After finishing 2011 at $0.85 per share, the company closed 2012 at $0.31 per share.

Weak EPS, But Strong Revenues

Despite its EPS problems, Verizon managed to pull in its highest quarterly revenue to date, eclipsing $30 billion for the first time in its history. For the year, it brought in nearly $116 billion - up 4.5 percent from 2011.

Revenues were boosted by a strong performance in the wireless arena. The company reports an 8.5 percent increase in fourth quarter wireless service revenues. This was sparked, in part, by 2.2 million retail net additions. The company also notes that its 4G LTE service is now available to over 273 million people in 476 US markets.

Verizon's wire line services, including FIOS Internet and FIOS Video, also performed well during the quarter. The company reports 144,000 and 134,000 net additions for FIOS Internet and FIOS Video, respectively, during the quarter.

Market Reaction

The knee-jerk reaction may be to expect Verizon to tank in the market as word of its EPS woes spreads like wildfire. However, Verizon is actually above water in the early hours of trading on Tuesday.

A bit of positive news came out Monday, which could be helping the company. According to the Tampa Tribune, Verizon launched a new TV package that is completely devoid of sports programming.

The new “Select HD” option will cost $49.99 as compared to its “Prime HD” package, which costs $64.99, as notes the Tampa Tribune. Thus, grandma and others who are tired of paying extra for ESPN and the NFL Network can save a few bucks.

Perhaps investors believe the new package will be a hit, offsetting the company's negative earnings report.

As of this writing, Verizon is hovering up around 0.5 percent on Tuesday.


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