Verizon Communications Inc (NYSE:VZ) shares rose in early trading on Monday, despite the company reporting downbeat second-quarter revenues on Friday.
Verizon delivered on the KPIs (key performance indicators) that investors are focused on, according to Scotiabank.
• Verizon Communications stock is showing upward movement. What’s going on with VZ shares?
The Verizon Communications Analyst: Analyst Maher Yaghi reiterated a Sector Outperform rating, while raising the price target from $51.50 to $52.50.
The Verizon Communications Thesis: Total revenues declined by 0.7% year-on-year to $34.3 billion, missing consensus of $35.2 billion, due to "a material decline in wireless equipment revenue," with upgrade volumes slowing and lower device subsidies, Yaghi said in the note.
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He added that the KPIs that Verizon delivered on were:
- Mobility and broadband service revenue growth accelerating to 2.8% year-on-year.
- Postpaid phone net adds improving to 184,000, from 55,000 in the previous quarter, surpassing consensus of 111,000.
- Consumer phone churn improved to 0.84%, from 0.90% in the previous quarter.
- Total postpaid phone churn improved to 0.92%, from 0.97% last year.
- Broadband subscribers grew 12% year-on-year to 348,000, including 193,000 fixed wireless net adds and 155,000 fiber net adds, bringing total broadband connections to 17.1 million.
The analyst noted that management reiterated its postpaid phone net add target, while the company added only 239,000 in the first half of the year, which calls for a significant ramp in the back half.
An improvement in net account additions is critical for Verizon to maintain its revenue growth momentum into next year, Yaghi stated.
"We continue to think the cumulative effect of better churn management, lower subsidy intensity, and a more converged go-to-market model should support a more sustainable growth run-rate, but the 2H subscriber ramp still needs to come through," he further wrote.
Outlook: Verizon raised 2026 guidance for:
- Mobility and broadband service revenue growth to 2.5%-3%, from 2.0%-3%.
- Adjusted earnings to $4.99-$5.04 per share, from $4.95-$4.99 per share.
- Free cash flow growth to 9%-10%, from 7% or more.
VZ Price Action: Shares of Verizon Communications had risen by 2.122% to $47.41 at the time of publication on Monday.