Verizon Earnings Preview: Double-Digit EPS Growth To Continue?

, which won a victory in the U.S. Court of Appeals last week in a case about whether the FCC had the authority to enforce net neutrality, is scheduled to report its fourth-quarter and full-year 2013 results Tuesday, January 21, before the opening bell. Investors will be looking to see whether smartphone sales and wireless net additions received a boost during the holidays, and whether increased competition from Sprint and T-Mobile had an impact on results. The company also is nearing completion of its takeover of its Verizon Wireless business

Analysts on average predict that Verizon will report that revenue rose more than three percent year-over-year to $31.02 billion. Per-share earnings are expected to come to $0.65 for the quarter, compared with $0.77 in the third quarter, but up from $0.45 per share in fourth quarter of last year. That consensus earnings estimate has remained unchanged in the past 60 days. Verizon has not fallen short of earnings expectations in the past three quarters. The third-quarter EPS surprised analysts, who had expected the company to report $0.74 per share earnings. Verizon attributed strong third-quarter results to continued high customer demand for Verizon Wireless, FiOS and strategic enterprise services. It pointed out that it had delivered double-digit earnings growth in six of the previous seven quarters. Shares jumped more than eight percent in the days following the third-quarter report. The analysts' consensus full-year forecast calls for $2.83 per share earnings on revenue of $120.53 billion. That would be up from $2.31 per share and $115.85 billion in the previous year. That consensus EPS estimate also has remained steady over the past 60 days.

Verizon Communications is a global broadband and telecommunications company that serves around 99 million retail customers. Its Verizon Wireless segment offers access to various wireless voice and data services. Is Wireline segment offers video services over its fiber-optic network, high-speed Internet and FiOS broadband data products and landline services. Verizon is a component of both the S&P 500 and the Dow Jones Industrial Average, it is based in New York City and its market capitalization is more than $138 billion. The company was founded in 1983, and Lowell McAdam has been the chief executive officer since July 2011. Competitors include AT&T and Sprint. The former is expected to post solid EPS growth and marginal revenue growth when it reports fourth-quarter results on January 28. The latter is expected to report a wider net loss than a year ago, along with a marginal revenue decline, when it shares quarterly results in February. During the three months that ended in December, Verizon acquired content delivery network provider EdgeCast and Intel's online pay-TV venture called OnCue. Verizon also sought to swap unused spectrum with T-Mobile and said it would publish regular reports on government data requests.

Verizon's long-term EPS growth forecast is more than 10 percent. Its operating margin is higher than those of AT&T or Sprint, but its return on equity is less than seven percent. Note that its price-to-earnings (P/E) ratio is about 63. The dividend yield is about 4.2 percent. The number of Verizon shares sold short, as of the December 31 settlement date, represented almost three percent of the float. That was the highest level of short interest in at least a year. It would take about eight days to close out all of the short positions. Nine of 31 analysts surveyed by Thomson/First Call who follow the stock rate it at Strong Buy, and another 12 also recommend buying shares. The analysts' mean price target signals more than 10 percent potential upside in the coming year. That consensus target is less than the 52-week high, though. The share price has drifted downward about three percent in the past 90 days, falling below the 50-day and 200-day moving averages. The stock is still more than 13 percent higher than a year ago. Over the past six months, Verizon has outperformed AT&T, but it has underperformed Sprint, T-Mobile and the broader markets.

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