ii view: Verizon dials earnings growth hopes higher
This Dow Jones company has increased its dividend payment for more than 15 consecutive years. Offering an attractive dividend yield, we assess prospects.
21st July 2025 15:24
by Keith Bowman from interactive investor
Second-quarter results to 30 June
- Revenue up 5.2% to $34.5 billion (£25.6 billion)
- Adjusted earnings per share up 6% to $1.22 per share
- Quarterly dividend of 67.75 US cents per share, unchanged from Q1
- Unsecured debt of $119.4 billion (£88.6 billion), down from $125.3 billion a year ago
Guidance:
- Now expects growth in full-year adjusted earnings of 1-3%, up from a previous 0-3%
- Now expects annual free cash flow of up to $20.5 billion, up from a previous $17.5-18.5 billion
Chief executive Hans Vestberg said:
“Verizon's strong second-quarter financial performance reflects our high-quality, industry-leading customer base, our multiple growth paths, the success of our disciplined, segmented approach, and the inherent strength of our company.”
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ii round-up:
Verizon Communications Inc (NYSE:VZ) today detailed sales and earnings that beat Wall Street forecasts, with the telecom giant also raising estimates for annual earnings and free cashflow.
A fourth consecutive quarter of growth in core pre-paid mobile phone customers, as well a gain in market share for broadband customers, pushed second-quarter revenues up 5.2% from a year ago to $34.5 billion (£25.6 billion). Adjusted earnings climbed 6% to $1.22 per share, above forecasts for $1.18. Helped by government tax reform, Verizon now expects growth in annual adjusted earnings of 1-3%, up from a previous 0-3%.
Shares in the Dow Jones company rose 4% in US trading having come into these latest results up around 2% so far in 2025. That's similar to rival T-Mobile US Inc (NASDAQ:TMUS). The Dow Jones index is up by 4% year-to-date.
Verizon serves both retail and business customers. Total wireless retail connections increased 1.2% from a year ago to 146.1 million. The average revenue for each consumer retail account rose 2.3% to $147.50 from Q2 2024. Total sales for the business division retreated 0.3% on the same basis to $7.3 billion.
Capital expenditure for the quarter fell to $8 billion from $8.1 billion a year ago, helping free cashflows rise to $16.8 billion from $16.6 billion in Q2 2024.
Verizon now expects annual free cashflows of $19.5-20.5 billion, up from a previous $17.5-18.5 billion.
A previously announced quarterly dividend payment of 67.75 US cents per share, payable on 1 August to eligible shareholders, is unchanged from the prior first quarter.
ii view:
Previously Bell Atlantic, Verizon today employs around 100,000 people. Retail or consumer related revenues were the biggest during 2024 at just over three-quarters, with business related sales accounting for the balance. Management moves in 2024 included a move to outsource or lease its more than 6,000 mobile phone towers across the USA to infrastructure firm Vertical Bridge, as well a $20 billion deal to buy broadband provider Frontier.
For investors, industry competition remains intense, with business customers likely to be watching every dollar spent. An estimated forward price/earnings (PE) ratio above the three-year average may suggest the shares are not obviously cheap. Generating a return on its major 5G investments continues to occupy management, while total group debt of $146 billion compares to a stock market value of $172 billion.
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More favourably, initiatives such as price locks continue to attract customers and help overall wireless revenues grow. Acquisitions, such as the previous deal to buy broadband provider Frontier, are aiding growth. AI-powered innovations are expected to personalise customer service, while the pandemic has arguably added to the need for fast data from more locations.
In all, and while risks remain, sizeable cashflows support a forecast dividend yield of close to 7% which will likely be attractive to income seekers.
Positives
- Focus on costs
- Attractive dividend (not guaranteed)
Negatives:
- High competition
- Total debt of $146 billion
The average rating of stock market analysts:
Strong hold
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