Verizon (VZ, Financial) exceeded earnings forecasts with steady revenue growth in Q1, despite the challenges of inflation leading to strategic pricing actions. The company witnessed a minor loss of 68,000 retail postpaid phone subscribers, a notable improvement from the previous year and better than analyst expectations. With a confident start to FY24, Verizon remains optimistic about achieving its guidance, including an adjusted EPS of $4.50-4.70, wireless service revenue growth of +2.0-3.5%, and a CapEx of $17.0-17.5 billion.
Verizon's success in limiting phone subscriber churn to 0.89% can be attributed to effective price adjustments and a strong network quality that keeps it ahead of competitors like AT&T (T, Financial) and T-Mobile US (TMUS, Financial). Moreover, Verizon has enhanced customer loyalty through attractive bundles with streaming services such as Netflix (NFLX, Financial) Max (WBD, Financial), and the Disney+, Hulu, and ESPN (DIS, Financial) package, offering them at a lower cost than separate subscriptions.
The company's Consumer segment saw a revenue increase of 0.8% year-over-year to $25.1 billion, compensating for the underperformance in the Business segment. This contributed to a total revenue growth of 0.3% to $33.0 billion. However, concerns arose as broadband net additions slowed and the Business segment's revenue fell by 1.6% year-over-year to $7.4 billion, highlighting the economic and competitive challenges Verizon faces.
Despite initial positive reactions to Q1 achievements, Verizon's stock struggled as investors focused on the broader challenges, including a slow broadband net add rate and competitive pressures in the Business segment. The company's efforts to distinguish itself in a market with limited competitors and focus on debt reduction, rather than stock repurchases or dividend increases, may lead to continued sideways movement in its stock price in the near term.
