Verizon earnings: What to expect as lead-cable concerns linger over wireless stocks

Verizon shares have been under pressure in July after reporting from the Wall Street Journal asserted risks stemming from legacy lead-clad cables used by the telecommunications industry. Investors will be looking for Verizon’s management to discuss the next steps — and the possible costs associated with them.

“We expect wireline carriers to share more information with investors and regulators around their use of lead-sheathed cables in their networks in coming weeks,” Morgan Stanley analyst Simon Flannery wrote in an industry preview. “We hope to get a better sense of exposure by company, as well as the likely need for and cost of any potential remediation.”

See also: AT&T to pause prior plans to remove lead cables under Lake Tahoe as it works with regulators

As for the raw numbers of second-quarter earnings, here’s what Wall Street is expecting out of Verizon’s results:

What to expect

Earnings: Analysts tracked by FactSet expect that Verizon earned $1.17 a share in adjusted earnings, down from $1.31 a share a year before. On Estimize, which crowdsources projections from hedge funds, academics and others, the average estimate is for $1.18 a share.

Revenue: The FactSet consensus calls for $33.3 billion in revenue, down from $33.8 billion a year before. On Estimize, the average projection is for $33.4 billion.

Stock movement: Verizon shares have fallen after six of the company’s past seven earnings report, though they notched a 2% gain after the most recent one.

The stock has declined 14% so far this year, as AT&T Inc. shares
T,
+1.29%
have fallen 19% and as T-Mobile US Inc. shares
TMUS,
+0.33%
have inched up 1%. The S&P 500
SPX,
+0.40%
is up 19% on a year-to-date basis.

Of the 28 analysts tracked by FactSet who cover Verizon’s stock, six have buy ratings, 20 have hold ratings and two have sell ratings, with an average price target of $40.98, about 21% above Verizon’s Monday close.

What else to watch for

Evercore ISI analyst Vijay Jayant expects Verizon to have shed about 25,000 postpaid wireless subscribers in the latest quarter, making for a “modest” decline in a period when peers AT&T and T-Mobile are both expected to have picked up subscribers, and when cable providers are thought to have made inroads in the wireless market as well.

But for the broader wireless market, overall growth “is clearly slowing…as industry
growth can’t outrun population growth forever,” he commented.

Citi’s Michael Rollins also anticipates that Verizon lost 25,000 wireless postpaid subscribers in the June quarter.

“We expect [Verizon] to maintain its targeted actions to improve postpaid adds that could eventually include migration from its prepaid base,” he wrote. “The combination of some modest back-book pricing actions, new rate plans, cost cuts, and slower upgrades could be helpful for [Verizon’s second-half] financial performance.”

Edward Jones analyst David Heger thinks Verizon has made progress in its efforts to curry greater favor among wireless consumers, though he recently downgraded the stock amid the lead-cable concerns.

“Verizon has recently increased handset promotional activity and simplified pricing to attract and retain consumer subscribers,” he wrote. “As a result, consumer execution is improving.”