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Verizon Communications:
Attractive Choice for the Long-Term

In a recent issue of Market Focus, Value Line’s open-access newsletter providing unbiased insights on investments, the markets and the global economy, Ian Gendler highlights Verizon Communications (VZ). The New York-headquartered telecom behemoth has a market capitalization of around $200 billion and has been a member of the Dow Jones Industrial Average since April 2004.

“Verizon's performance in 2017 was unimpressive. The company posted flat-or-lower bottom-line comparisons in each of the four quarters last year. In the December period, Verizon registered earnings of $0.86 a share, matching the year-earlier figure, on a 5.0% revenue gain. As we turned the page to the new year, the telecom giant's prospects have improved. On point, recent changes to the company's business model will probably not impact the company as much in the months ahead. Specifically, the combined effects of the April 1, 2016 sale of Verizon's high-margined wireline operations in California, Florida, and Texas to Frontier Communications, and the ongoing shift of wireless customers to lower-priced device payment plans should not be as much of a drag on revenues and earnings. What's more, The Tax Cuts and Jobs Act of 2017 should bolster cash flow and share net. Verizon's projected tax rate range is now 24% to 26% due to the legislation. Consequently, we target a sizable earnings advance, to $4.50 a share, this year, and a $0.10 gain, to $4.60 a share, in 2019.

The company has a strong financial position, making Verizon well positioned to continue to make bolt-on acquisitions in the years ahead. Enhancing its strategic capabilities and building out its spectrum assets would likely be the areas of focus. Verizon should continue to be shareholder friendly, too. Stock repurchases and dividend hikes appear likely.

“As for the VZ shares, they represent an attractive choice for the long term. Indeed, patient investors may find the recent quotation to be a nice entry point. More specifically, the blue chip's total return potential is well above that of the average equity covered in the Value Line universe.

Lastly, income-oriented investors may want to note this high-quality stock's well covered 4.8% dividend yield.”

Editor’s Note: Ian Gendler is Executive Director, Value Line Research, www.valueline.com.

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