FBR Capital Reiterates Outperform on Verizon Communications (VZ) Following Solid 3Q
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FBR Capital reiterated an Outperform rating and $57.00 price target on Verizon Communications (NYSE: VZ) following the company's 3Q earnings report. Consolidated revenue of $30.9B was below the consensus of $31.0B, driven primarily by a 3.9% YOY decline in wireless revenue and a 2.3% YOY decline in wireline revenue. Adjusted EPS of $1.01 was ahead of the consensus estimate of $0.99.
Analyst David Dixon commented, "Weaker macroeconomic conditions and an increasingly competitive market chipped away at VZ's results this quarter. The shift to a lower-priced, unsubsidized device model should continue to weigh on wireless revenues, exacerbated by declining net add growth due to heightened competition. Management vows to protect its highquality subscriber base, but competitive network quality is converging. VZ still leads the market but may need to use the pricing lever to a greater extent to maintain market share, as all other national competitors are offering unlimited data plans at attractive price points. Strategically, VZ will seek to differentiate through accelerated 5G deployment, relying on 3.5 GHz unlicensed spectrum as its indoor play and spectrum refarming, which should yield cost savings and expedite launch due to a growing ecosystem around 3.5 GHz. We think AT&T is leading in IoT, but this is a growth segment with network standards finally set. A weak macro environment in all verticals is driving lower capex; we see a capacity spectrum supply shock driving less dependency for licensed spectrum for 5G. M&A and weaker expected growth due to capacity challenges at T Mobile are potential 2017 catalysts. We maintain Outperform and our price target of $57."
Shares of Verizon Communications closed at $49.14 yesterday.
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