Verizon Communications Inc. (NYSE:VZ) reported mixed financial numbers in the second quarter of 2017. While the top line outpaced the Zacks Consensus Estimate, the bottom line met the mark.
Quarterly GAAP net income was $4,478 million or $1.07 per share compared with $831 million or 17 cents per share in the year-ago quarter. Adjusted earnings per share came in at 96 cents in the reported quarter, in line with the Zacks Consensus Estimate.
Total revenue increased 0.1% year over year to $30,548 million beating the Zacks Consensus Estimate of $29,907 million.
Total operating expenses in the second quarter of 2017 were $22,316 million, down 14.1% year over year. Operating income came in at $8,232 million compared with $4,554 million in the year-ago quarter. Adjusted EBITDA was $12,399 million compared with $8,536 million in the prior-year quarter.
Cash Flow & Liquidity
In the first half of 2017, Verizon generated $9,918 million of cash from operating activities compared with $12,908 in the year-ago period. Free cash flow in the reported period was $2,907 million compared with $5,635 million in the prior-year quarter. At the end of the second quarter of 2017, Verizon had $4,583 million in cash and $117,543 million in long-term debts compared with $2,880 million and $108,078 million, respectively, at the end of 2016. The debt-to-capitalization ratio was 0.81 at the end of the second quarter of 2017, flat with the 2016-end figure.
Wireless Segment
Total revenue was $21,282 million, down 1.9% year over year. Service revenues dropped 6.7% to $15,622 million. Equipment revenues increased 16% to $4,298 million. Other revenues totaled $1,362 million, up 8.2%.
Operating expenses increased 1.4% to $13,872 million. Operating income declined 7.6% to $7,410 million. Quarterly operating income margin was 34.8% compared with 36.9% in the year-ago quarter. Segment EBITDA decreased 5.3% to $9,757 million. EBITDA margin was 45.8% compared with 47.5% in the prior-year quarter.
As of Jun 30, 2017, Verizon had 112.536 million retail subscribers, up 1.2% year over year. Of the total, retail postpaid subscriber count was 109.088 million, up 1.2%. Meanwhile, retail prepaid user count was 5.448 million, up 1.4%. In the reported quarter, the company gained 0.614 million postpaid customers and 0.019 million prepaid customers.
Quarterly retail postpaid churn rate was 0.94%, flat year over year. Total retail churn rate was 1.18% compared with 1.19% in the year-ago quarter. Of the total activated phones, smartphones accounted for 95.2% compared with 92.1% in the prior-year quarter. Retail postpaid ARPA (average revenue per account) was $134.89 compared with $145.09 in the year-ago quarter.
Wireline Segment
Total revenue at the segment was $7,802 million, up 1.2% year over year. Consumer retail revenues were up 0.6% to $3,184 million. Enterprise Solutions revenues contracted 0.4% to $2,388 million. Partner Solutions revenues dropped 0.4% to $1,236 million. Business Markets revenues grossed $921 million, up 9%. Other revenues decreased 13.1% to $73 million.
Operating expenses decreased 6.1% to $7,734 million. Quarterly operating income was $68 million against an operating loss of $524 million in the year-ago quarter. Quarterly operating margin came in at 0.9% as opposed to an operating loss of 6.8% in the year-ago quarter. Segment EBITDA was up a whopping 58.5% to $1,620 million. EBITDA margin was 20.8% compared with 13.3% in the year-ago quarter.
As of Jun 30, 2017, FiOS video subscriber base was 4.666 million (up 0.6% year over year), FiOS Internet subscriber count was 5.737 million (up 4.4%) and FiOS digital voice residence connections totaled 3.909 million (up 0.8%). During the quarter, Verizon lost 15,000 FiOS video subscribers while gaining 22,000 FiOS digital voice residential connections and 49,000 FiOS internet subscribers.
High-speed internet connection dropped 17.6% year over year to 1.251 million while total broadband connection number was pegged at 6.988 million, down 0.4%. Primary residence switched access connections decreased 15.4% to 2.962 million and Primary residence connections fell 6.9% to 6.871 million. Total retail residence voice connections declined 7.3% to 7.079 million and total voice connections contracted 7.8% to 13.352 million.
Recent Developments
Verizon currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. The company is facing intense competitive pressure from rivals like AT&T Inc. (NYSE:T) , T-Mobile US Inc. (NYSE:T) and Sprint Corp. (NYSE:S) . In order to counter this, the company has been focusing on generating revenues from video streaming services and digital advertising. Keeping with this strategy, it acquired AOL, Millennium Media and internet-based assets of Yahoo (NASDAQ:AABA).
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