Verizon: Cash Is King

May 28, 2020 3:57 PM ETVerizon Communications Inc. (VZ)43 Comments
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WG Investment Research


  • Verizon's stock has disappointed so far in 2020, as it has underperformed the broader market by a wide margin.
  • The company recently reported mixed Q1 2020 results, but I believe that Verizon is well-positioned to weather the current COVID-19 related storm.
  • We are long Verizon, and we plan to add at current levels.

Verizon's (NYSE:VZ) stock performance has been subpar over the last few years, and it has pretty much been the same story so far in 2020. On a YTD basis, VZ shares have underperformed the S&P 500 (SPY) by approximately 3 percentage points.

ChartData by YCharts

Poor investor sentiment for the communications sector (and I should note for good reason) has wreaked serious havoc on Verizon's stock price, but I believe that this company is worthy of investment dollars at today's price.

The company's Q1 2020 operating results were not great by any means, but, in my opinion, investors should feel better knowing that the company is properly positioned from a cash flow perspective to easily weather the COVID-19 related uncertainty. Moreover, when compared to its closest competitor, AT&T (T), Verizon's cash flow metrics are something to write home about.

The Latest

On April 24, 2020, Verizon reported Q1 2020 results that beat the bottom-line estimates but that missed on the top-line. The company reported adjusted EPS of $1.26 (beat by $0.04) on revenue of $31.6B (missed by $770mm), which from an earnings perspective actually compares favorably to the year-ago quarter.

Source: Q1 2020 Earnings Slides

The highlights:

  • Total revenue and adjusted EBITDA declined by 1.6% and 0.1%, respectively. Cash flow from operations was higher by 24% YoY (more on this below)
  • Media sales declined by 4% YoY (to $1.7B) due to poor ad rates (largely a pandemic related headwind)
  • The pandemic negatively impacted quarterly EPS by $0.04
  • The company ended the quarter with $7B of cash on hand

As expected, the Media division had a rough start to 2020 as advertising took a significant hit as a direct result of the current pandemic. However, in a broader context, Verizon reported largely mixed results (strong earnings, a challenged top-line, and mixed operating metrics) but investors were mostly concerned

This article was written by

WG Investment Research profile picture
Our President and CIO is a CPA with experience in public accounting and the financial services industry. He earned his Master of Accountancy degree in 2008 and his B.S. in Business Management in 2007. He is also a Level III CFA candidate. He has been intrigued by the market from the start. Over the years, he has learned that long-term investing is a discipline that, if followed, will help contribute to building lasting wealth. As such, most of our articles will be about the investments that we plan to hold for at least 3 to 5 years, as long as the company's story does not change. As a Seeking Alpha contributor, our main goal is to write about the companies that are key to our portfolio with the hope of promoting discussion (for or against the investment) from others within the SA community.Please visit our website for more information about W.G. Investment Research LLC.

Disclosure: I am/we are long VZ, T. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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