Verizon third-quarter earnings, revenue beat Wall Street estimates

By Sinead Carew

NEW YORK (Reuters) - Verizon Communications Inc on Thursday posted stronger- than-expected third-quarter earnings and revenue driven by wireless growth, sending its shares up nearly 4 percent.

While wireless customer growth was slightly below Wall Street estimates, its Verizon Wireless venture with Vodafone Group Plc posted good profit and revenue growth as customers spent more on data services. Verizon has agreed to buy out Vodafone's 45 percent share of the venture.

The subscriber shortfall caused some concern the company, the first U.S. telephone operator to report this quarter, was losing market share to rivals such as T-Mobile US Inc.

New Street analyst Jonathan Chaplin said that while Verizon's financials were "outstanding," "there were clear signs that a resurgent TMUS is impacting even Verizon."

Chief Financial Officer Fran Shammo conceded some lower-spending customers moved to rival services in the quarter, but said some customer additions were delayed to the fourth quarter mostly due to supply constraints involving Apple Inc's iPhone. About one-half its smartphone sales were iPhones.

Still, Shammo told analysts on the company's quarterly conference call that "we continue to gain market share."

The executive said that 8.4 percent service revenue growth at Verizon Wireless was sustainable in the short term but expected the growth rate to decline in the future.

Verizon Wireless added 927,000 net retail subscribers in the quarter, compared with Wall Street expectations of about 1 million customers, according to eight analysts, with estimates ranging from 900,000 to 1.2 million.

While much of Verizon's growth was from customers connecting devices like tablet computers, Verizon said phone customers, still made up the most of its growth at 481,000.

Verizon said it expects wireless customer growth to improve sequentially in the fourth quarter but did not give specific estimates.

ENTERPRISE WEAKNESS

Verizon reported a third-quarter profit of $2.2 billion (1.3 billion pounds), or 78 cents per share, compared with $1.59 billion, or 56 cents per share, a year ago.

Excluding unusual items, Verizon earned 77 cents per share in the quarter, compared with Wall Street expectations of 74 cents, according to Thomson Reuters I/B/E/S.

Its wireless profit margin was 51.1 percent, based on earnings before interest, taxes, depreciation and amortization(EBITDA) as a percentage of service revenue, and above its target range of 49 percent to 50 percent for the full year.

Rethemeier said the profit margin would likely come down in the fourth quarter due to steep holiday season costs, since the company kept its wireless margin target for the year despite the strong third-quarter number.

Revenue rose 4.4 to $30.28 billion from $29.01 billion. Wall Street expected $30.16 billion, according to Thomson Reuters I/B/E/S.

Strong wireless service revenue growth for the quarter was offset by a decline of 3 percent in its global enterprise business and a slower 4.3 percent rise in its consumer business, which includes its FiOS television service.

Verizon's enterprise business was affected by government budget cutbacks and cost cuts in the private sector, according to Shammo, who expects the business to remain flat in 2014.

"Generally speaking, enterprise customers continue to be cautious regarding new investment decisions," Shammo said.

Verizon shares rose 3.7 percent to $49.02 in morning trade on the New York Stock Exchange.

(Reporting by Sinead Carew; Editing by Jeffrey Benkoe)

Source: http://news.yahoo.com/verizon-third-quarter-earnings-revenue-beat-wall-street-125802608--finance.html
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