Verizon Communications’ (VZ) first-quarter financial results are likely to be mixed, with churn management seen as a key priority for this year, RBC Capital Markets said in a note e-mailed Tuesday.
The telecommunications giant is scheduled to report first-quarter results April 22. RBC projects adjusted earnings to fall about 7% year over year to $1.12 per share amid higher interest costs. That result would match Wall Street’s views. The brokerage expects revenue to grow 0.1% to $32.96 billion, below the Street’s $33.3 billion estimate, mainly driven by wireless equipment sales, RBC analysts Jonathan Atkin and Bora Lee said.
The firm projects wireless service revenue growth at 3.1% on an annual basis, led by 3.8% average revenue per account growth. The Street is looking for 3.2% and 3.9%, respectively, RBC said. Verizon is also likely to see continued momentum in gross additions, with consumer postpaid phone adds poised to grow 7.4% year over year. Price increases in wireless are expected to raise churn in the first quarter, but also drive $100 million per month of incremental revenue going forward, Atkin and Lee said.
Churn is the rate at which customers discontinue their subscriptions. RBC raised its price target on the Verizon stock to $40 from $36 on expectations of cost efficiency progress beyond 2025, it said. The brokerage has a sector perform rating on the stock.
Consumer postpaid phone net adds are likely to reflect a decline of 200,000, while prepaid net adds are seen falling by 270,000. The Street is looking for declines of 193,000 and 232,000, respectively, according to the note.
RBC expects broadband net adds to reach 402,000, versus the Street’s 419,000 projection. The firm said it cut its fixed wireless access, or FWA, nets outlook to 355,000 from 388,000 on expectations that the expansion of AT&T’s (T) FWA product will provide “a better defense to non-fiber footprint.”
RBC projects first-quarter capital expenditures at $4.43 billion, which it said was roughly in line with the Street’s expectations.
“We have learned that despite a planned capex step-down in 2024, the company was able to allocate the budget from other largely completed projects such as Fiber One towards new sites and C-Band deployment to the remaining (about) 45% of company’s [about 74,000] towers,” the analysts said. At the rate of 1,000 towers a month, Verizon would require two to 2.5 years to complete the rollout, according to the note.