Shares of Verizon Communications (VZ) are down 15 cents, or 0.4%, at $36.95 in early trading after the company this morning reported Q3 revenue and earnings per share ahead of consensus and reiterated its year outlook.
Revenue in the three months ended in September rose 5.4%, year over year, to $27.9 billion, yielding EPS of 56 cents, excluding some costs.
Analysts had been modeling $27.88 billion and 56 cents.
Verizon said it is “on track” to meet its outlook for 5% to 8% EPS growth, on an adjusted basis, this year, and 4% to 8% revenue growth.
Verizon’s wireless unit added 1.3 million connections in the quarter, with 882,000 “post-paid” additions, those taking out a contract. It ended the quarter with 107.7 million connections, 90.7 million of them “retail,” and the rest “wholesale.”
The company saw average revenue per user, or ARPU, rise 2.4%, with “post-paid” ARPU, rising 15.7%. Total wireless revenue of $15 billion rose 6.1%.
The wireless subscriber growth was less than the 2.12 million that AT&T (T) yesterday reported adding in the same quarter, and on the post-paid side, it was below what many analysts were expecting. However, the growth in ARPU was better than the 1.4% growth AT&T reported.
There are some puts and takes here, mind you. The company’s 1-cent beat is being discounted by some because Verizon had a lower effective tax rate. It also excludes a 7-cent charge, Verizon said, relating to “actuarial valuation of pension plans.”
Verizon generated $9 billion in free cash flow.
In general, the thoughts from the bull and the bear seems largely favorable this morning:
Jennifer Fritzsche, Wells Fargo: Reiterates an Outperform rating, noting that the $17.7 billion in wireless revenue and $7.2 billion of Ebitda were both ahead of her estimates. The company’s wireless profit margin of 47.8 % was also ahead of her 46.2% estimate and was “impressive.” The company’s wireless post-paid net adds, below the 1.05 million she was looking for, were probably affected by the lag in the industry in advance of Apple’s (AAPL) next iPhone introduction, the iPhone 4S, which didn’t come out till this month.
Michael Rollins, Citigroup: Reiterates a Neutral rating and a $39 price target. He thinks “normalized” earnings at this point are 60 cents a share. The top line was below his $28.25 billion estimate. However, “normalized” Ebitda of $9.16 billion was above his $8.98 billion estimate. The post-paid net additions were less than he was looking for, but still wireless results were “solid,” he writes. Post-paid average revenue per user was higher than he’d expected. And wireless Ebitda was well ahead of the $6.89 billion he had been expecting.
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