Verizon Earnings Preview: First Quarter 2009

Verizon [[VZ]] is scheduled to report their first quarter 2009 results after the market closes on Thursday, April 23. Based on our analysis, we at are expecting VZ to report disappointing results that fail to meet Wall Street’s consensus expectations.


Analyst Expectations

We are forecasting revenues of $25.55 billion and EPS of $.58. This would represent an 8% increase in revenues from last year’s $23.58 billion in the same period. The current analyst consensus estimates calls for revenues of $26.21 billion and $.59 EPS.


Verizon has experienced increased competition from AT&T [[T]] in recent quarters due to the ever-popular Apple iPhone. While there is a possibility that Verizon will be allowed to sell the iPhone in the future, it doesn’t appear likely in 2009.


Without a “must-have” selling point like the iPhone, we feel that Verizon could be impacted by the decline in consumer spending. While the company still offers an attractive and safe 5.8% dividend yield to investors, it’s doubtful that the stock will see much appreciation in 2009.


Share Performance

Verizon’s shares are down over 7% since the beginning of the year. In 2008, Verizon’s shares held up reasonably well, falling only 22% compared to the 34% drop in the Dow Jones index.



Shares are now trading at 12x consensus 2010 EPS estimates. This is a slight premium to the relative valuations of their peer group. Verizon’s shares are currently trading close to our price target, but dividend investors should be attracted to their high dividend yield which we don’t expect the company to cut.


Recommendation: Hold with a $30 price target.


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