Verizon earnings, revenue miss Street estimates, sending shares lower

Key Points
  • Verizon reported EPS of 95 cents vs estimate of 96 cents, according to Thomson Reuters analysts' consensus.
  • The telecom company had sales of $29.814 billion vs $30.487 billion estimate, according to Thomson Reuters.
Verizon Q1 misses on top and bottom line
Verizon Q1 misses on top and bottom line

Verizon Communications reported first-quarter earnings and sales on Thursday that missed analysts' expectations, sending shares lower.

Here's what the company reported versus what the Street was expecting:

  • EPS: 95 cents vs estimate of 96 cents, according to Thomson Reuters analysts' consensus.
  • Revenue: $29.814 billion vs $30.487 billion estimate, according to Thomson Reuters.

The stock closed down more than 1 percent on Thursday.

Total revenues for Verizon's wireless business were $20.9 billion in the first quarter, a decline of 5.1 percent from one year ago, which was largely due to decreased overage revenue, lower postpaid customers in the quarter and continued promotional activity, Verizon said.

Verizon also reported a net decline of 307,000 retail postpaid connections, or those who are bound by contracts, including 289,000 phone losses. The telecom company said it added a net of 35,000 Fios internet connections, missing quarterly estimates, and it lost a net of 13,000 Fios video connections for the period.

"... we extended our wireless and fiber network capabilities, began offering an unlimited pricing option and expanded our opportunities in new markets," Verizon Chief Executive Lowell McAdam said in a statement, commenting on the latest quarter. "We're executing on strategies to capture future growth ..."

Verizon said it completed its acquisition of XO Communications' fiber assets earlier this year, part of its plan to expand its cell network.

On Thursday, the company predicted its full-year 2017 sales to be "fairly consistent" with those in 2016, with improvements being made in wireless service revenue and equipment revenue trends. Verizon's 2017 effective tax rate should fall within a range of 34 to 36 percent, the company said, which would exclude any impacts from the Trump administration's potential tax reform.

The telecom giant's much-talked-about acquisition of Marissa Mayer's Yahoo is still pending, complicated by the two data breaches that Yahoo announced last year, which affected up to 1.5 billion users throughout 2013 and 2014.

The companies initially agreed to a $4.8 billion deal, but in February, Verizon lowered the price to $4.48 billion, according to a filing with the Securities and Exchange Commission.

Earlier this week, amid heightened dealmaking activity in the telecom sector, Verizon CEO McAdam said he is open to discussing the possibility of merging his company with Disney, CNBC owner Comcast, or CBS, according to Bloomberg.

Referring to Comcast Chief Executive Brian Roberts, McAdam told Bloomberg: "If Brian came knocking on the door, I'd have a discussion with him about it."

"... if there is the right opportunity out there to accelerate [Verizon's] strategy organically in a way that adds shareholder value, we're always looking at those opportunities," Verizon Chief Financial Officer Matthew Ellis explained McAdam's comments in a conference call Thursday.

"We are committed to remain the largest and most reliable 4G network ... As part of the densification, we are deepening our fiber assets as seen by the XO transaction" and continuing to focus on "organic" growth, for now, Ellis added.

The CFO said he's confident wireless subscriber growth will reach a positive trajectory later in the year and into 2018, so long as Verizon keeps prices at the "right levels" and works on stepping customers up.

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Disclosure: Comcast is the owner of NBCUniversal, the parent company of CNBC and CNBC.com. CNBC also has a content sharing agreement with Yahoo Finance.