Will Low Wireline Revenues Dent Verizon's (VZ) Q4 Earnings?
Zacks Investment Research | Jan 27, 2019 09:16PM ET
Verizon Communications Inc. (NYSE:VZ) is scheduled to release fourth-quarter 2018 results before the opening bell on Jan 29. The company is likely to record lower year-over-year revenues from the Wireline segment despite healthy improvement in FiOS fiber-optic network and strategic services.
Whether this will hurt the bottom line of the company remains to be seen.
Key Factors
Verizon is facing a steady decline in legacy wireline services. The company’s wireline division is struggling with persistent losses in access lines as a result of competitive pressure from voice-over-Internet protocol service providers and aggressive triple-play (voice, data, video) offerings by the cable companies.
In an effort to expand its customer base, Verizon is spending heavily on promotion and is also offering lucrative discounts. Moreover, Verizon is streamlining its cost structure. These strategies are likely to affect the company’s EBITDA and EBITDA service margins in the quarter.
At the same time, Verizon continues to lose Fios Video connections amid pressure from cord-cutting of video bundles. Continued cord-cutting has further led to decline in revenues as consumers increasingly cancel pay TV packages for cheaper streaming options from Netflix (NASDAQ:NFLX), Amazon (NASDAQ:AMZN), Hulu and other services.
However, the company expects healthy improvement in margins on the back of the expected savings from tax reform as well as continued strong FiOS network and strategic services in the Wireline business. Its efforts to stoke growth include improving operating and capital efficiency. In the enterprise and the wholesale business, Verizon is changing its revenue mix toward newer growth services like cloud, security and professional services. Also, it is looking forward to capitalize on the countless innovative technology solutions being developed in the Internet of Things and telematics ecosystem across multiple industries. Further, the company’s current focus on online content delivery, mobile video and online advertising should drive growth.
Despite the positives, the Zacks Consensus Estimate for revenues from the Wireline segment is pegged at $7,355 million. The segment reported $7,617 million in the year-ago quarter. The lower revenue expectations can be attributed to soft demand and cheaper competitive options. The consensus estimate for segment EBITDA is pegged at $1,477 million. It recorded $1,594 million in the year-earlier quarter.
Overall Expectations
Total revenues for the company are expected to be $34,321 million. It generated revenues of $33,955 million in the prior-year quarter. (Read More: Earnings ESP Filter .
Verizon Communications Inc. Price and EPS Surprise
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