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Will Higher Aggregate Revenues Buoy Verizon (VZ) Q1 Earnings?

Verizon Communications Inc. VZ is scheduled to report first-quarter 2021 results on Apr 21, before the opening bell. In the last reported quarter, the New York-based telecom and media giant beat the Zacks Consensus Estimate by 5 cents.

The company is expected to have recorded higher aggregate revenues year over year, despite disruptions caused by the COVID-19 pandemic, driven by a healthy momentum in its wireless business.

Factors at Play

During the quarter under review, Verizon continued the aggressive rollout of 5G Ultra Wideband service to expand its coverage to 67 cities across the country. In order to entice more customers, the company offered various Unlimited plan options with 5G service at attractive price points. This is expected to get reflected in the first-quarter results.

During the first quarter, Verizon collaborated with Unity for creating and operating real-time 3D content for both enterprise clients and entertainment and game developers. The company also inked a partnership with global insurance broker Hub International Limited to deliver managed network services to more than 450 offices throughout the United States and Canada to better manage the rapid growth of its business. Further, the company joined forces with Deloitte to expand mobile edge computing solutions within the retail industry. These are expected to have driven the company’s earnings.

In order to help small business enterprises tide over the coronavirus-induced adversities, Verizon introduced Complete Business Bundle solutions during the quarter. With reliable, plug-and-play Internet connectivity, desk phone and security solutions with 24/7 tech support, these solutions enabled the digital transformation of small business entities. The company also offered cloud-based Contact Center as a Service from Genesys to help customers transition to cloud-based contact center platforms that offer personalized interactions via multi-experience outcomes. Such initiatives are likely to have led to top-line growth in the quarter.  

During the quarter, Verizon further expanded Fios Forward to support digital inclusion and provide opportunities for underserved households to thrive in the digital world. With no data caps, Fios customers can experience faster upload and download than comparable plans. However, adverse foreign currency translations, evolving market conditions post the deadly virus outbreak and continued investments for 5G deployments are likely to have led to soft margins. This might have affected its revenues to some extent in the to-be-reported quarter.

The Zacks Consensus Estimate for total revenues for the company stands at $32,440 million. It generated revenues of $31,610 million in the prior-year quarter. The consensus mark for earnings is currently pegged at $1.29 per share, indicating an improvement from $1.26 reported in the year-earlier quarter.

Key Developments in Q1

During the first quarter, Verizon inked an agreement to acquire Austria-based software firm — incubed IT — in order to augment its robotic automation capabilities in industrial settings. Leveraging 5G technology and edge computing capabilities, the company intends to harness incubed’s autonomous software to develop new business opportunities for enterprises and scale up robotic automaton. This, in turn, is likely to enable the company to better serve its customers.

In order to expand coverage and improve connectivity, Verizon acquired 161MHz of mid-band spectrum in the C-Band auction during the quarter for a total consideration of $45.5 billion. These airwaves offer significant bandwidth with better propagation characteristics for optimum coverage in both rural and urban areas.

Earnings Whispers

Our proven model predicts an earnings beat for Verizon this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is perfectly the case here.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +0.41%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Verizon currently has a Zacks Rank #3.

Other Stocks to Consider

Here are some other companies you may want to consider, as our model shows that these too have the right combination of elements to post an earnings beat this season:

NETGEAR, Inc. NTGR is set to release quarterly numbers on Apr 21. It has an Earnings ESP of +1.52% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Earnings ESP for Sonos, Inc. SONO is +31.82% and it carries a Zacks Rank of 1. The company is set to report quarterly numbers on May 5.

The Earnings ESP for T-Mobile US Inc. TMUS is +5.45% and it carries a Zacks Rank of 3. The company is scheduled to report quarterly numbers on May 5.

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