LONDON, UK / ACCESSWIRE / October 26, 2016 / Active Wall St. announces its post-earnings coverage on Verizon Communications Inc. (NYSE: VZ). The company posted its financial results for the third quarter fiscal 2016 on October 20, 2016. The largest U.S network carrier reported its second consecutive decline in revenue and its lowest quarter of subscriber growth in more than six years. Register with us now for your free membership at: http://www.activewallst.com/register/.
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Earnings Reviewed
For the three months ended on September 30th, 2016, Verizon reported net income of $3.62 billion, or $0.89 per share, compared to net income of $4 billion, or $0.99 per share, in the year ago period. Earnings, adjusted for non-recurring costs and severance costs, were $1.01 per share, topping Wall Street's expectations of $0.99 per share.
Operating revenues in Q3 2016 were $30.9 billion, a 6.7% decrease, compared to Q3 2015, which was below estimates for $31.09 billion, according to Thomson Reuters.
Organically, IoT revenues, led by telematics, increased 24% on a comparable basis to Q3 2015, to $217 million.
Segment Review
Verizon's Wireless segment reported 442,000 retail post-paid net additions in Q3 2016, falling short of the 875,000 average forecasted by eight analysts surveyed by Bloomberg. At the end of Q3 2016, Verizon had 113.7 million retail connections, a 2.6% y-o-o-y. The company's retail post-paid connections base grew 3.0% to 108.2 million, and retail prepaid connections totaled 5.5 million. Total revenues for the segment were $22.1 billion in Q3 2016, a decline of 3.9% compared to Q3 2015, as more customers continued to choose unsubsidized device payment plans. Service revenues plus device payment plan billings increased 2.3% to $19.3 billion. The percentage of phone activations on device payment plans was about 70% in the reported quarter compared to about 67% in Q2 2016. Retail post-paid churn was 1.04% in Q3 2016, a y-o-y increase of 11 basis points, as strong retention in the phone base was offset by increased churn in tablets.
As of September 30, 2016, Verizon Wireless had a total of about 35.8 million device payment plan phone connections, representing about 41% of the post-paid phone base. This segment's operating income was $7.6 billion, and its operating income margin was 34.6%. The segment's EBITDA margin (non-GAAP) was 44.9% compared to 43.2% in Q3 2015.
Wireline highlights
For Q3 2016, Verizon's total Wireline division's revenue decreased 2.3% to $7.8 billion. Retail consumer revenues grew 0.2% to $3.2 billion, supported by consumer Fios revenue growth of 4.2%. Verizon added a net of 90,000 Fios Internet connections and 36,000 Fios Video connections in Q3 2016.
Wireline operating income was $156 million in Q3 2016 compared to a loss of $109 million in Q3 2015. This segment's EBITDA margin was 21.2% in the reported quarter, compared to 18.9% in the year ago period, due to Fios growth and cost management.
Cash Matters
Cash flows from operations totaled $4.8 billion in Q3 2016. Cash taxes were higher compared to a year ago, due primarily to tax payments of $2.4 billion in the reported quarter related to the gain on sale of wireline operations divested earlier this year. Verizon also made a discretionary pension contribution in Q3 2016, bringing full-year pension funding payments to approximately $750 million. In September, Verizon's Board of Directors approved a 2.2% dividend increase, the 10th consecutive year with an increase.
Outlook
Verizon expects FY16 adjusted earnings to be at a level comparable to 2015, excluding a $0.7 per share impact of the 2016 work stoppage. The company expects consolidated capital spending for 2016 at the low end of the range of $17.2 billion to $17.7 billion and organic growth in consolidated revenues for full-year 2017 consistent with GDP growth for that year, with adjusted EPS growth at normal levels.
Stock Performance
Verizon's stock is trading slightly down by 0.77%, closing Tuesday's session at $47.84 on volume of 16.43 million shares, which was above the 3 months average volume of 12.70 million shares. The company's shares gained 8.17% since the beginning of the year. Additionally, the stock has advanced 7.85% in the last twelve months. The company's shares are trading a PE ratio of 13.94 and have a dividend yield of 4.83%.
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