Healthy Wireless Traction To Aid Verizon (VZ) Q2 Earnings

Verizon Communications Inc. (NYSE:VZ) is scheduled to release second-quarter 2019 results before the opening bell on Aug 1. The company is likely to witness solid year-over-year revenues from the Wireless segment, which accounts for the lion’s share of total revenues.

Whether this will benefit its bottom line remains to be seen.

Key Factors

During the quarter, Verizon spurred technological innovation and economic development by making the ecosystem more pervasive with 4G LTE, and focused on increased 5G deployment across select U.S. cities. The telecom behemoth launched 5G Ultra Wideband network in certain locations of Chicago and Minneapolis, followed by a similar move in Denver and Providence. This will enable the company to deliver faster peak data speeds and capacity for customers, driven by customer-focused planning, disciplined engineering and constant strategic investments. This, in turn, is likely to translate into higher revenues for the quarter.

The company’s focus on online content delivery, mobile video and online advertising should also stoke growth. During the quarter, Verizon collaborated with industry-leading web-based video playback services providers — THEO Technologies and IRIS.TV — to enrich its video streaming network. The move is expected to play a crucial role in the wireless carrier’s delivery of new mobile video services with advertising functionality to monetize video content. The AI-powered programming platform will use machine learning techniques to generate unique insights about audience behavior and monetize content while retaining viewers through personalized touch.

The company anticipates healthy improvement in the Wireless segment margin on the back of a solid fiber-optic network. During the second quarter, Verizon inked an agreement with the National Basketball Association (“NBA”) to augment network capabilities of all the 29 arenas that host NBA teams. Leveraging the extensive fiber network deployment and video broadcast distribution capabilities of its media services division, the strategic deal enables Verizon to better connect with the sporting buffs. Notably, the segment EBITDA is expected to improve to $10,933 million from $10,733 million in the year-ago quarter.

Overall Expectations

Buoyed by such tailwinds, the Zacks Consensus Estimate for operating revenues for the Wireless segment is currently pegged at $22,912 million. Notably, it reported revenues of $22,449 million in the year-ago quarter. The higher revenue expectations can be attributed to an uptick in demand and an upgrade to state-of-the-art infrastructure.

Total revenues for the company are expected to be $32,395 million. It generated revenues of $32,203 million in the prior-year quarter. (Read More: Can Higher Wireless Revenues Buoy Verizon Q2 Earnings?)

Earnings Whispers

Our proven model shows that Verizon is likely to beat earnings in the second quarter as it possesses the key components. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is perfectly the case here as you will see below:

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +0.52% with the former pegged at $1.21 and the latter at $1.20. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Verizon has a Zacks Rank #3. This increases the predictive power of ESP and makes us reasonably confident of an earnings beat.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.

Other Stocks to Consider

Here are some other companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Ciena Corporation (NYSE:CIEN) is set to release quarterly numbers on Aug 29. It has an Earnings ESP of +5.26% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Earnings ESP for Motorola Solutions, Inc. (NYSE:MSI) is +1.25% and it carries a Zacks Rank of 3. The company is set to report quarterly numbers on Aug 1.

The Earnings ESP for TELUS Corporation (NYSE:TU) is +2.61% and it carries a Zacks Rank of 2. The company is slated to report quarterly numbers on Aug 2.

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