Stock Story -
Telecommunications giant Verizon (NYSE:VZ) reported Q4 CY2024 results beating Wall Street’s revenue expectations, with sales up 1.6% year on year to $35.7 billion. Its non-GAAP profit of $1.10 per share was in line with analysts’ consensus estimates.
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Verizon (VZ) Q4 CY2024 Highlights:
- Revenue: $35.7 billion vs analyst estimates of $35.34 billion (1.6% year-on-year growth, 1% beat)
- Adjusted EPS: $1.10 vs analyst estimates of $1.10 (in line)
- Adjusted EBITDA: $11.93 billion vs analyst estimates of $12.04 billion (33.4% margin, 1% miss)
- Free Cash Flow Margin: 15%, up from 11.6% in the same quarter last year
- Market Capitalization: $164.9 billion
Wireless, Cable and Satellite
The massive physical footprints of cell phone towers, fiber in the ground, or satellites in space make it challenging for companies in this industry to adjust to shifting consumer habits. Over the last decade-plus, consumers have ‘cut the cord’ to their landlines and traditional cable subscriptions in favor of wireless communications and streaming video. These trends do mean that more households need cell phone plans and high-speed internet. Companies that successfully serve customers can enjoy high retention rates and pricing power since the options for mobile and internet connectivity in any geography are usually limited.Sales Growth
Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Unfortunately, Verizon struggled to consistently increase demand as its $134.8 billion of sales for the trailing 12 months was close to its revenue five years ago. This was below our standards and signals it’s a low quality business.We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new product or trend. Just like its five-year trend, Verizon’s revenue over the last two years was flat, suggesting it is in a slump.
This quarter, Verizon reported modest year-on-year revenue growth of 1.6% but beat Wall Street’s estimates by 1%.
Looking ahead, sell-side analysts expect revenue to grow 2% over the next 12 months. While this projection implies its newer products and services will catalyze better top-line performance, it is still below the sector average.
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Cash Is King
Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.Verizon has shown impressive cash profitability, giving it the option to reinvest or return capital to investors. The company’s free cash flow margin averaged 14.3% over the last two years, better than the broader consumer discretionary sector.
Verizon’s free cash flow clocked in at $5.36 billion in Q4, equivalent to a 15% margin. This result was good as its margin was 3.4 percentage points higher than in the same quarter last year, but we wouldn’t read too much into the short term because investment needs can be seasonal, leading to temporary swings. Long-term trends are more important.