Verizon Stock Drops After Earnings Report

Early Monday, Verizon announced that it lost 158,000 net users in its consumer postpaid wireless business during the first three months of 2024. That’s an improvement from the 263,000 users lost in the first quarter of 2024. last year, as well as compared to the first quarter of 2024. quarterly losses in 2022 and 2021.

Telecoms, including rivals T-Mobile and AT&T
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are fighting for customers as demand cooled following a huge surge in users at the start of the pandemic. In response, Verizon implemented a series of changes, including bringing on Sowmyanarayan Sampath to lead its consumer group about a year ago. It also launched myPlan, a new setup that lets users choose features based on their needs, such as for more hotspot data.

The New York-based operator offered users more incentives last week with some plans including a bundle of streaming services like Disney+ and Hulu free for six months..

Verizon’s Business group added 90,000 net postpaid phone users, up from 136,000 in the year-ago quarter. It represents approximately 22% of annual turnover compared to 76% for the consumer division.

The results follow positive comments from Verizon at industry conferences. In March, management told Deutsche analysts that it was seeing “continued growth,” driven by younger children getting phones and more businesses using cellphones for services such as curbside pickups. street edge.

Overall, Verizon lost 68,000 monthly wireless subscribers in the first quarter compared to the previous quarter. That was better than the consensus for a loss of 100,000 among analysts surveyed by FactSet.

While the number of postpaid subscribers increased in the fourth quarter compared to the third, management said at an industry conference last month that the first quarter was generally weaker.

Investors may have been rattled by the possibility that a government plan – the Affordable Connectivity Program – which offered discounted internet services to low-income families could end in May. Verizon, which has 1.1 million prepaid ACP users, did not include the effects of the end of subsidies in its financial forecast, but service revenue could be hit by as much as 50 basis points, or half a -percentage point, executives said at a news conference. call to discuss the results.

“It’s actually too early to say what’s happening and what might happen in terms of where customers are going and all that,” Chief Financial Officer Tony Skiadas said. Barron’s shortly after the call. He said Verizon intends to counter customer loss with other acquisition strategies, but declined to elaborate on those.

Another sticking point is free cash flow, which ended at $2.7 billion in the first quarter. This is lower than the $4.1 billion reported late last year and analysts’ expectations of $4 billion.

Unlike AT&T, Verizon does not offer quarterly cash flow guidance, but management said it expects cash to “accumulate throughout the year, similar to 2023.” », where they had posted 18.7 billion dollars. Levels have historically improved in the second and third quarters. Free cash flow is critical because it helps grow dividends, an attractive feature of telecom stocks.

Net debt, another driver of dividend growth, stood at $147.3 billion, roughly in line with levels over the past three years.

Verizon did not change its financial outlook for 2024. It expects adjusted earnings per share of between $4.50 and $4.70, in line with analyst estimates of $4.59.

For the first quarter, the company posted adjusted earnings of $1.15 per share, compared to expectations of $1.12. Operating revenue came in at $33 billion, slightly below Wall Street’s forecast of $33.2 billion. This was due to a decrease in wireless equipment revenue as customers delayed upgrading their devices.

Next stop: AT&T

reports Wednesday morning and T-Mobile reports Thursday.

Write to Karishma Vanjani at karishma.vanjani@dowjones.com.