Verizon Q1 Earnings Beat Expectations with Cash Flow Growth
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 6 days ago
0mins
Should l Buy VZ?
Source: seekingalpha
- Earnings Performance: Verizon's Q1 non-GAAP EPS of $1.28 exceeded expectations by $0.07, indicating ongoing improvements in profitability, although total revenue of $34.4 billion, up 2.9% year-over-year, fell short of expectations by $490 million, reflecting increased market competition pressures.
- Strong Cash Flow Growth: The company reported free cash flow of $3.8 billion in Q1, a 4% increase from $3.6 billion in the same quarter last year, demonstrating effective cost control and spending optimization strategies, with expectations for 2026 free cash flow to exceed $21.5 billion, marking the highest level since 2020.
- Significant User Growth: Verizon achieved 55,000 postpaid phone net additions in Q1, marking the first positive growth in this category since 2013, with a year-over-year improvement of over 340,000, showcasing the company's success in attracting new customers.
- Stable Service Revenue: Mobility and broadband service revenue reached approximately $22.9 billion, a 1.6% year-over-year increase, despite an 80 basis point impact on service revenue growth due to a January network outage, yet the company still anticipates service revenue growth of 2% to 3% in 2026, reflecting resilient market demand.
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Analyst Views on VZ
Wall Street analysts forecast VZ stock price to fall
14 Analyst Rating
4 Buy
10 Hold
0 Sell
Moderate Buy
Current: 48.030
Low
43.00
Averages
46.42
High
51.00
Current: 48.030
Low
43.00
Averages
46.42
High
51.00
About VZ
Verizon Communications Inc. is a holding company. The Company, through its subsidiaries, provides communications, technology, information and streaming products and services to consumers, businesses and government entities. Its Consumer segment provides wireless and wireline communications services. It also provides fixed wireless access (FWA) broadband through its 5G or 4G Long-Term Evolution (LTE) networks portfolio. The Company's Business segment provides wireless and wireline communications services and products, including FWA broadband, data, video and advanced communication services, corporate networking solutions, security and managed network services, local and long-distance voice services and network access to deliver various Internet of Things (IoT) services and products. It provides these products and services to businesses, public sector customers and wireless and wireline carriers across the U.S. and a subset of these products and services to customers around the world.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- Investment Return Potential: Over the past decade, SCHD has achieved a 229% price return, with quarterly dividends increasing from $0.12 in 2011 to approximately $0.25 in early 2026, demonstrating its appeal and stability for long-term investors.
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- Risk and Reward Balance: At an 8.5% blended yield, the capital requirement to replace a $75,000 annual income drops to approximately $885,897, making high yields tempting yet risky, necessitating careful assessment of the balance between returns and risks for investors.
See More
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- Tax Impact Consideration: Qualified dividends are taxed at lower rates, while distributions from BDCs and REITs are taxed as ordinary income, necessitating investors to consider tax implications when restructuring their portfolios to optimize net returns.
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- Acquisition Impact: The recent debt increase primarily stems from the $20 billion acquisition of Frontier Communications, and the $53 billion spent on C-band spectrum in 2021, which, while enhancing network quality, has further exacerbated the debt load.
- Ongoing Capital Expenditures: Verizon plans to allocate $16 billion to $16.5 billion in capital expenditures this year, only slightly down from $17 billion last year, which continues to pressure cash flow, as evidenced by a first-quarter free cash flow of $3.8 billion that barely covers $2.9 billion in dividend payments.
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- Revenue Continues to Rise: Verizon's overall revenue increased by 2.9% year-over-year to $34.4 billion, with service revenue rising 2.4% to $28.8 billion, indicating successful responsiveness to customer demand.
- Improved Profitability: Adjusted earnings per share (EPS) climbed 7.6% to $1.28, while EBITDA grew 6.7% to $13.4 billion, showcasing the company's dual advantages in cost control and revenue growth.
- Optimistic Future Outlook: Verizon expects to add between 750,000 to 1 million postpaid phone subscribers for the year and has slightly raised its adjusted EPS guidance to a range of $4.95 to $4.99, reflecting confidence in future growth.
See More
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- Same-Store Sales Struggles: TSCO's same-store sales growth was only 0.5%, significantly below the expected 1.6%, although the company anticipates a 1% to 3% increase for the year, indicating challenges in a competitive retail landscape.
- Stability of Realty Income: Realty Income (O), a real estate investment trust, owns over 15,511 retail properties with an occupancy rate exceeding 98%, and has raised its quarterly dividend for 114 consecutive quarters, currently offering a dividend yield of 5.1%, providing investors with stable cash flow.
- Verizon's Ongoing Appeal: Verizon Communications (VZ) added 340,000 net postpaid wireless customers in Q1 and expects to gain one million customers by 2026; despite a 1.80% stock decline, its dividend has increased for 19 years, with a yield over 6%, highlighting its attractiveness to income-focused investors.
See More
