Earnings Preview: Verizon to report 3Q results

AP News
Posted: Oct 16, 2012 11:47 AM
Earnings Preview: Verizon to report 3Q results

NEW YORK (AP) — Verizon Communications Inc., parent of the country's biggest wireless carrier, is expected to report Thursday on results for a quarter that included the launch of a new iPhone and a new labor contract.

WHAT TO WATCH FOR: During Verizon's July-September quarter, the iPhone 5 went on sale. It was the biggest phone sales event of the year. The launch of a new iPhone reliably curbs profits of phone companies because they have to subsidize the cost down to $200. Apple charges about $600 for each iPhone.

Supplies of iPhone 5s were short, though, and it only launched a week before the end of the quarter, so it's unclear how much of an impact it will have on Verizon's third-quarter results.

There are other moving parts at Verizon Wireless. Just before the quarter started, it made the biggest change to phone-plan pricing the industry has seen in a decade. On June 28, it dropped most of its phone plans in favor of one plan that provides unlimited calling and shares a pool of data among up to ten devices.

The third quarter's report will provide the first indication of how the new plans are doing. Colby Synesael at Cowen Securities believes the "Share Everything" plan has had strong traction, helped by aggressive marketing.

As usual, investors will be looking for the number of new subscribers on contract-based plans, which are the most lucrative. Analysts believe Verizon is set to extend its lead by adding a net 900,000 subscribers.

Verizon Communications, the New York-based phone company, owns 55 percent of Verizon Wireless. The rest of the wireless division is owned by Vodafone Group PLC of Britain.

Kevin Smithen at Macquarie Securities said investors will also be listening for projections of savings on the Verizon Communications Inc. side, thanks to a new labor deal it struck with 43,000 employees. For the first time, active employees will be contributing to their health care premiums.

WHY IT MATTERS: Verizon Wireless sends out bills for 94 million wireless devices, and there are millions more on the network through wholesale access deals. Verizon Communications still has 23 million landlines as well. The stock is a component of the 30-stock blue-chip Dow Jones industrial average.

Verizon's report marks the debut for telecommunications companies this earnings season. Rival AT&T Inc. reports on Wednesday.

The company reports as there's turmoil in the lower ranks of the wireless industry, with No. 3 Sprint selling a 70 percent stake to Softbank Corp. of Japan and No. 4 T-Mobile USA striking a deal to buy No. 5 MetroPCS Communications Inc. Because of its size, Verizon is somewhat aloof from these intrigues, but its executives might provide some perspective.

WHAT'S EXPECTED: Analysts polled by FactSet on average expect Verizon to report earnings of 65 cents per share on revenue of $29.0 billion.

LAST YEAR'S QUARTER: Verizon reported a profit of 49 cents per share for the third quarter of 2011. Revenue was $27.9 billion.