Verizon increases outlook with strong Q3 2020 financial results

Updated: However, Verizon has not met analyst expectations.

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Verizon has reported relatively strong Q3 2020 results -- considering the disruption caused by COVID-19 -- and has increased its annual outlook and guidance for the full financial year.

On Wednesday, the telecoms giant posted third-quarter financial results (statement) reporting consolidated revenues of $31.5 billion, down 4.1% in comparison to Q3 2019, and $1.05 earnings per share (EPS). Excluding special items -- namely, a pension charge -- adjusted EPS is recorded as $1.25.  

Wall Street analysts expected $1.22 earnings per share at a revenue of $31.6 billion, versus $32.9 billion in Q3 2020.

Verizon says overall operating revenue is down due to "lower customer activity and the timing of certain device launches."

Verizon added, "the company estimates that third-quarter 2020 EPS and adjusted EPS included approximately negative 5 cents of COVID-19-related net impacts," and also included a "net pre-tax charge of about $1.1 billion related to a mark-to-market adjustment for pension liabilities."

Year-to-date cash flow is recorded as $32.5 billion, an increase of $5.7 billion year-over-year, and year-to-date expenditure reached $14.2 billion, with investment pouring into supporting traffic on existing 4G infrastructure; building and launching 5G networks, deploying new fiber systems, and upgrading the firm's Intelligent Edge Network. 

Verizon's net income in Q3 2020 was $4.5 billion. Adjusted EBITDA (non-GAAP) was $11.9 billion.

In the consumer sector, Verizon reported revenues of $21.7 billion, a decrease of 4.3% compared to Q3 2019. The company added 136,000 postpaid retail net additions, including 142,000 net phone additions and 258,000 postpaid smartphone net additions. 

Fios Internet consumer services are improving with the net addition of 139,000 in comparison to 30,000 new signups in Q3 2019. Verizon also says that an additional 144,000 Fios Internet (net) have been added across the Consumer and Business segments, the most recorded since 2014.

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The Verizon Business unit, however, is not performing quite as well, on the whole. Total revenue is reported as $7.7 billion over the third quarter, a decrease of 1.7% year-over-year. 417,000 wireless retail postpaid net additions are reported, consisting of 141,000 phone, 86,000 tablet, and 190,000 other connected device net additions. 

Business wireless service revenues were $3 billion in Q3 2020, rising by 4.9% year-over-year. Verizon says this increase is primarily due to signups within the public sector and SMB markets. 

Total wireless service revenues were $16.4 billion, a 0.3% increase year-over-year. In total, Verizon recorded 553,000 retail postpaid net additions, including 283,000 phone net additions and 428,000 postpaid smartphone net additions.  

CNET: Verizon to buy Bluegrass Cellular in continued push into rural service areas

Verizon Media revenues accounted for $1.7 billion of the total over Q3 2020, down 7.4% in comparison to Q3 2019. 

"We continue to demonstrate our strength and resilience by delivering very strong third-quarter financial results," said Verizon Chairman and CEO Hans Vestberg in a prepared statement. "We are energized by the transformational technology that our 5G Ultra Wideband and 5G nationwide bring. Our purpose-driven culture paired with our network leadership will shape the future, for the better."

Verizon has also updated the firm's financial guidance and outlook for the full 2020 fiscal year. The company now projects adjusted EPS growth of 0% to 2%, rather than -2% to 2%. In addition, Verizon predicts total wireless service revenue growth of at least 2% in Q4 2020, and capital spending is expected to hit between $17.5 billion to $18.5 billion.

Update 14.09 BST: 

Speaking to investors on a conference call discussing the Q3 2020 results, Vestberg said that while we are in the midst of a "crisis" due to COVID-19, "the executive team is working with business as usual to see that we continue to move this company forward" -- with a focus on monetizing 5G networks. 

The executive said the launch of the next-generation wireless technology infrastructure "commercially made sense" with the launch of the Apple iPhone 12 and the 5G/ultra-wideband ecosystem that Verizon is creating will go beyond consumer applications in order to tap into the commercial sector. 

Verizon has three main business cases for 5G: consumer, 5G Home, and mobile edge compute -- the latter of which is a corporate application of the technology on the same infrastructure. 

"We now have five mobile edge compute centers together with Amazon," Vestberg commented. "We also announced that Microsoft is now joining us on the mobile edge compute as well, focused on the private side of the 5G mobile edge compute. So we are actually gathering in some of the most important partners in the ecosystem to see that we can actually monetize this investment work done in the Network-as-a-Service [market]."

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See also: Samsung to supply Verizon with $6.6 billion worth of network equipment

In related news earlier this month, Verizon announced the acquisition of Bluegrass Cellular, a rural wireless operator serving roughly 210,000 customers in Kentucky. The deal also builds upon the recent $7 billion purchase of mobile carrier Tracfone.

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