There's a Silver Lining for Verizon Stock
Telecom giant Verizon Communications (NYSE: VZ) disappointed investors this week with a second-quarter earnings report that didn't quite live up to expectations. While adjusted earnings per share matched the consensus analyst estimate, revenue fell short.
Verizon stock slumped on the news, erasing most of its year-to-date gain. The revenue miss was primarily driven by a steep decline in customers upgrading their phones. Total upgrades were down about 13% year over year, which drove down the revenue Verizon collects from selling new smartphones. Equipment revenue dropped 5.3% from the year-ago period, accounting for the entirety of the company's revenue shortfall relative to analyst expectations.
While Verizon generates around $5 billion in sales each quarter from selling equipment like smartphones, that revenue isn't worth much. Verizon and other wireless providers use subsidized and discounted smartphones as a lure to snag new customers and retain existing customers. The net result is that Verizon generally turns a loss on equipment sales.
Source Fool.com
Verizon Communications Inc. Aktie
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