PreMarket Prep Stock Of The Day: Verizon

Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

For those who don't have the time to tune in live or listen to the podcast, Benzinga will highlight one stock that merits further discussion. This analysis is not a buy or sell recommendation.

When similar companies report earnings close to each other, the initial one can set the bar high or low. With respect to Verizon Communications Inc. VZ, AT&T T set a low bar for it to surpass with its Q2 report that beat for EPS but came up shy on sales. As a result, Verizon is rallying off its Q2 beat for both metrics, making it the PreMarket Prep Stock Of The Day.

Classic Value Stock: When looking at the definition of a value stock, i.e., "shares of a company with solid fundamentals that are priced below those of its peers, based on analysis of price/earnings ratio, yield, and other factors," Verizon fits right in.

It has a forward price to earnings ratio of 11.6 and pays a hefty dividend of 4.4%. When it comes to capital appreciation, it has been non-existent since July 2016. At that time, it peaked at $57 and after having some gyrations between July 2017 ($42.80) and December 2019 ($62.22), it's now trading at the exact level ($57) some four years later.

Better Performer Than AT&T Over Same Time Period: While Verizon is in the exact same place as it was four years ago, AT&T is not. Both companies have made some ill-fated acquisitions over the years, but AT&T has done more and as a result, has tons of debt to service.

Just as Verizon made its all-time high in July 2016, so too did AT&T. However, it's nowhere near that level of $43.89 as it meanders around the $30 area. Of course, its larger yield of 7% does somewhat cushion the blow of the 30% decline from its peak, but not nearly enough.

Price Action Ahead Of The Report: Since coming off its March low ($48.84) and rebound to $58.91 in April, Verizon has been in a trading range between $53 and $58. For the most part, it hasn't spent much time at the range extremes, with a majority of the price action in the $55-$56 area. Ahead of the report, the issue had a pair of lows at the $55.50 area and pair of highs at the $56.50 over the last week.

Q2 Beat: Before the open, the company announced at Q2 EPS beat of 3 cents along with a sales beat of $480 million. One contributing factor to the sales beat was the addition of 173,000 postpaid phone subscribers in the quarter.

Price Action When Being Covered On The Show: When Verizon was being covered on the show, it was slightly in the green at the $56 area. Based on the pre-market trading, the author of this article did not foresee the blast to $57.47 off the open. However, it was remarked that if it could not hold its early gains, it was likely to fade.

Price Action Off The Open: After a higher open, it blasted all the way to $57.57 and sharply reversed course. That high comes in between the pair of highs from June 16 ($57.32) and June 17 ($57.17) and below its June 11 high ($57.94). Since reaching that elevated, it has gone straight down and is just off its low for the session ($56.14) at $56.35 at the time of publication.

The full discussion on the issue from today’s show can be found here:

Image credit: Anthony92931, via Wikimedia Commons