Third Quarter Looking Rosy For Verizon

Aug.23.12 | About: Verizon Communications (VZ)

Verizon Communications (NYSE:VZ) has been on a roll, with revenue growing during each of the past four quarters on a year-over-year basis. In the second quarter, Verizon delivered another strong quarter of earnings growth and cash generation and remained on track to produce solid double-digit earnings growth for the year.

Headquartered in New York City, Verizon delivers broadband and other wireless and wireline communications services to consumer, business, and government and wholesale customers. On July 19, the company reported second-quarter 2012 revenue of $28.5 billion and earnings per share (NYSEARCA:EPS) of $0.64, for year-over-year increases of 3.7 percent and 12.3 percent, respectively. Verizon's second-quarter earnings reached $1.8 billion, 13.4 percent higher than the year-ago quarter.

The third quarter looks ever rosier. Analyst estimates for third-quarter EPS is $0.66; for the entire fiscal year, the average estimate has jumped to $2.50.

Verizon has locked in considerable long-term growth prospects. During the second quarter in its wireline division, the company added 134,000 FiOS (fiber optic) Internet and 120,000 FiOS video subscribers; FiOS Internet customers now total 5.1 million. Verizon enhanced its technological edge by investing another $3.6 billion this year in its FIOS network.

In the second quarter, the company's average revenue per wireline user topped $100 for the first time, increasing to $100.26, up 8.5 percent compared with the same year-ago quarter. The rate at which customers cancel services, called "churn," dropped to 1.1 percent compared to 1.2 percent in the year-ago quarter.

In late July, the company announced it has expanded its 4G Long Term Evolution (LTE) network and launched coverage in 33 new markets, including New Jersey and Pennsylvania. The company's 4G LTE network is now available in 337 markets in the US.

The company is also unveiling innovative services in the thriving "streaming video" space. In February, Verizon announced that it was partnering with Coinstar (CSTR) to offer a streaming video service to compete with Netflix (NASDAQ:NFLX)

Verizon announced in June that it paid $612 million to acquire Hughes Telematics, a manufacturer of wireless systems for vehicles. The move will allow Verizon to generate new sources of revenue by building up its presence in vehicle GPS, safety and entertainment.

Verizon has steadily increased dividends over the years, from $1.62 per share in 2006 to $1.975 in 2011. Verizon's robust numbers and shrewd strategic investments indicate continued growth ahead. With a 5 percent plus yield, Verizon rates as one of my top dividend-paying companies.

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