Verizon Q1 2016 Revenue Misses Estimates, While Profit Increases

The company's Q1 revenue of $32.17 billion was less than the $32.46 billion expected by analysts, while EPS met analyst estimates of $1.06.

Verizon, Q1 2016 revenue, wireless carriers, mobile carriers, revenue, profit, smartphones

Verizon's first-quarter revenue increased from a year ago, but came in lower than analyst's estimates, while the company's profit rose 2.2 percent from the same period in 2015. Meanwhile, Verizon added about 640,000 retail postpaid mobile customers in the quarter, while losing about 177,000 retail prepaid customers.

The $32.17 billion in first-quarter 2016 revenue is up 0.6 percent from the same quarter one year ago, but is lower than the $32.46 billion expected by a survey of 22 financial analysts, while the company's first-quarter 2016 net profit of $4.31 billion is up from $4.21 billion one year prior.

Verizon released its first-quarter figures on April 21. The company's total net income for the quarter was $4.43 billion, of which $4.31 billion is attributable to Verizon, according to the income statement. The remainder was attributable to non-controlling interests.

Consolidated earnings per share of $1.06 met analyst's estimates and were a 3.9 percent increase from the $1.02 EPS posted in the same quarter one year ago.

Verizon's wireless revenue for the first quarter totaled $22 billion, down 1.5 percent from the $22.32 billion posted a year earlier. The company added 640,000 retail postpaid net customers in the first quarter, compared to the addition of 565,000 customers for the same quarter one year ago. Verizon also reported a retail postpaid customer churn rate for the quarter of 0.96 percent, a decline from the 1.03 percent churn rate one year ago.

The company reported 107.17 million retail postpaid wireless customers in the first quarter, as well as 5.4 million retail postpaid wireless customers, for a total of 112.57 million customers. That's up from 108.58 million customers for the same quarter one year ago. Some 73.8 million smartphones were being used by its customers in the first quarter, making up about 85 percent of its total phone base. More than 81 percent of those devices in retail postpaid accounts are 4G-capable.

Revenue from the company's Internet of things (IoT) offerings brought in $195 million in the first quarter of 2016, up about 25 percent from one year ago.

"Verizon's strong first-quarter results demonstrate our capacity to compete effectively, while executing on our plan of continued network leadership and seeding new growth markets in mobile video and the Internet of things," Lowell McAdam, chairman and CEO of Verizon, said in a statement.

The 2016 first-quarter revenue of $32.17 billion and the net profit of $4.31 billion were down, compared with revenue of $34.3 billion and net income of $5.5 billion in last year's fourth quarter. The EPS for the fourth quarter of 2015 was 89 cents, which beat analyst estimates by 1 cent at the time.

One recent factor that will affect the company's performance as it heads into the second quarter is a labor strike that began on April 13, as some 40,000 employees walked out after talks failed to result in a new contract.

Charles King, principal analyst at Pund-IT, told eWEEK that the strike is "the biggest cloud on the horizon" for the company today. "If it goes for much longer or brings a relatively high increase in wages [for the affected workers], then it will certainly affect Verizon's financial performance in the future," said King.

Overall, Verizon's first-quarter results were "generally good, but not great" because while its profit was in line with analyst expectations, its overall revenues were a couple hundred million dollars lower than expected, he said.

Chris Antlitz, a telecom analyst with Technology Business Research, told eWEEK in an email reply to an inquiry that a deeper look into Verizon's numbers show that "its revenue growth stemmed from recent acquisitions and was not organic," while "margins improved due to ongoing cost cutting" more than actual revenue and profit increases. "Verizon is a company in transition. Its diversification and transformation strategy toward becoming a digital service provider is more important than ever as its core business shrinks, particularly its venerable wireless business, which delivered its first year-to-year quarterly revenue decline since its inception."

Jan Dawson, chief analyst at Jackdaw Research, said Verizon's "revenues are down because the wireless business is going through a transition from the old-style service contracts with subsidized device pricing to the new installment billing model for phones." While that is affecting the company now, "it's relatively predictable and should stabilize over the next year or so," he added. "Wireless results were pretty solid otherwise, with better growth than in the first quarter the last two years, but it's become increasingly clear that Q1 is Verizon's toughest quarter for wireless growth each year. Device upgrades are slowing down at Verizon, as they are everywhere else, as a result of those installment plans and Verizon's increasing fees for upgrades."

Independent wireless analyst Jeff Kagan said that as Verizon continues to move forward from its wired-line past to its wireless and digital future, it will be important for the company to "create the next growth wave before the current one fades." Part of that has already been happening, wrote Kagan, with the company's acquisition of AOL in 2015 and with its current desire to acquire Yahoo. "… That's good; however, I don't see anything happening with Verizon with regards to growth and the future. Verizon's success in wireless is all about their performance yesterday, but what about tomorrow?"