On Thursday, Citi reiterated its Buy rating on shares of Verizon Communications (NYSE:VZ) with a price target of $47.00, following the company's announcement of acquiring Frontier Communications (OTC:FTRCQ) (NASDAQ:FYBR) for $38.50 per share in an all-cash transaction. The acquisition is expected to yield cost synergies of approximately $500 million.
Verizon has confirmed its guidance for 2024 and has announced an increase in its quarterly dividend. Additionally, the company expects the Frontier deal to contribute positively to its revenue and EBITDA growth, as well as earnings. The transaction is anticipated to complete within 18 months, potentially by early 2026. Based on end-of-year 2025 estimates, the deal is valued at approximately 9.5 times EBITDA.
Citi views the acquisition as strategically beneficial for Verizon, enhancing its financial growth through a broader focus on converged mobile and broadband services. The firm maintains a positive outlook on Verizon's shares. Regarding Frontier, the possibility of receiving competing offers from companies such as T-Mobile and AT&T is noted, given the industry's interest in integrated service offerings.
In other recent news, Verizon Communications has announced its plans to acquire Frontier Communications in a $20 billion all-cash transaction. This move is aimed at expanding Verizon's fiber optic network and enhancing its competitive edge. The acquisition is expected to finalize within 18 months and contribute positively to Verizon's revenue and adjusted earnings.
Moreover, TD Cowen has maintained its Buy rating for Verizon, following discussions with company executives. The firm highlighted Verizon's readiness for Generation AI fiber deals and the completion of C-Band spectrum deployment by the end of 2025.
In terms of financial performance, Verizon reported a steady increase in its second-quarter 2024 results, with a 3.5% year-over-year increase in wireless service revenue and a total consolidated revenue of $32.8 billion. The company also reported a 69% YoY increase in its subscriber base, now exceeding 3.8 million subscribers.
Adjusted EBITDA for Q2 2024 rose to $12.3 billion, marking a 2.8% increase from the previous year. These are the recent developments in the company's operations and financial performance.
InvestingPro Insights
As Verizon Communications (NYSE:VZ) moves forward with its acquisition of Frontier Communications, the market responds with a cautious but stable outlook. According to InvestingPro data, Verizon boasts a market capitalization of $174.61 billion, reflecting its substantial presence in the telecommunications sector.
The company's commitment to shareholder returns is evident with a dividend yield of 6.41% as of the last dividend ex-date on July 10, 2024. This aligns with the InvestingPro Tip that Verizon has maintained dividend payments for 41 consecutive years, underlining its reliable dividend history.
Furthermore, analysts have adjusted their earnings expectations downwards for the upcoming period, which could be a point of consideration for investors. Despite this, Verizon's stock is known to trade with low price volatility, as noted by another InvestingPro Tip, which may appeal to investors seeking stability in their portfolio. For those interested in exploring further, there are additional InvestingPro Tips available that delve into Verizon's financial health and market position.
With a P/E ratio of 15.45, Verizon is trading at a valuation that suggests a balance between its earnings and market expectations. The company's revenue for the last twelve months as of Q2 2024 stands at $134.24 billion, with a slight revenue growth of 0.61% in the most recent quarter. These metrics, coupled with a gross profit margin of 59.85%, paint a picture of Verizon's financial robustness.
Investors looking for more in-depth analysis and additional tips can find them at InvestingPro's dedicated Verizon page, which offers a comprehensive suite of tools and insights to inform investment decisions.
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