Here's What Buy-Side Analysts Expects From Verizon

Jan.21.14 | About: Verizon Communications (VZ)

Verizon Communications Inc. (NYSE:VZ) is set to release FQ4'2013 earnings before the opening bell Tuesday, January 21. Verizon recently won a high profile court case in which a U.S. appeals court struck down net neutrality as we know it. One result of this ruling is that in the future Verizon may be able to charge businesses and individuals variable pricing depending on the type and quantity of data consumed by internet usage. This may help Verizon to expand its margins at the expense of high traffic websites like Netflix (NASDAQ:NFLX) and Amazon(NASDAQ:AMZN) in the near future.

The information below is derived from data submitted to the Estimize.com platform by a set of Buy Side and Independent analyst contributors.image

The current Wall Street consensus expectation is for VZ to report 64c EPS and $31.005B revenue while the current Estimize.com consensus from 16 Buy Side and Independent contributing analysts is 66c EPS and $30.995B revenue. VZ has met or exceeded Wall Street's profit consensus in 4 times over the past 6 quarters. Verizon's reported profit has been above and below the Estimize consensus 3 times each.

By tapping into a wider range of contributors including hedge-fund analysts, asset managers, independent research shops, students, and non professional investors Estimize has created a data set that is up to 69.5% more accurate than Wall Street, but more importantly it does a better job of representing the market's actual expectations.

The magnitude of the difference between the Wall Street and Estimize consensus numbers often identifies opportunities to take advantage of expectations that may not have been priced into the market. In this case we are seeing a small differential between the groups.image

The distribution of estimates published by analysts on Estimize range from 63c to 68c EPS and $30.750B to $31.101B in revenues. This quarter we're seeing a larger distribution of estimates than usual. The size of the distribution of estimates relative to previous quarters often signals whether or not the market is confident that it has priced in the expected earnings already. A wider distribution signaling the potential for greater volatility post earnings, a smaller vice versa.image

Over the past 4 months Wall Street has increased its EPS forecast from 63c to 64c while the Estimize.com consensus has remained flat at 66c. Wall Street revenue expectations have increased from $30.970B to $31.005B while the Estimize consensus surged late from $30.957B to $30.996B. image

The analyst with the highest estimate confidence rating this quarter is danvk, who projects 67c and $31.059B in revenue. In the Winter 2014 season, danvk is currently ranked as the 2nd best analyst and is ranked 118th overall among over 3,400 contributing analysts. Estimate confidence ratings are calculated through algorithms developed by deep quantitative research which looks at correlations between analyst track records and tendencies as they relate to future accuracy. In this case the highest rated analyst is expecting VZ to beat the street by a wide margin on both the top and bottom line.

As the owner of the largest wireless network in the United States, Verizon is well positioned to benefit from selling smartphones. If Verizon can continue to cash in as a phone retailer while simultaneously expanding its margins on internet related services, we could see a big increase in the profit forecast for Verizon sometime this year.

Disclosure: No positions