Strong Growth Potential For Verizon, AT&T

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Includes: T, VZ
by: Matt Schilling

I'd like to focus on the 'Titans of Telecom' and the tremendous growth potential of both Verizon Communications (NYSE:VZ) and AT&T (NYSE:T). Both companies have been solid dividend plays, but the upcoming quarters look to separate the men from the boys. The growth potential for the two companies, especially in the 4G LTE space, is enormous and revenues continue to show solid growth.

Verizon Communications

Here's a fantastic stock that currently yields 5.1%, which is about 45% higher than the Dow Jones average yield of 2.7%. One important thing investors should consider is the fact that Verizon is the clear winner in the race for Apple's (NASDAQ: AAPL) new version of the iPad. The iPad should run the best on Verizon's 4G LTE network, giving Verizon wireless customers the edge over Sprint (NYSE:S) and AT&T users in terms of download speed and streaming capabilities.

Why now is the right time to invest in Verizon: The company has 4G LTE network capabilities, which have lived up to the hype. It has proven it can handle what the latest Apple iPad requires, and customers are very satisfied with the dividend. Verizon & Apple's relationship could strengthen in the coming quarters, given the possibility of newer Wi-Fi enabled products Apple may have in its pipeline.

Earnings Preview: Verizon is set to report quarterly earnings on April 19, and analysts are estimating an average EPS of $0.59/share and revenue of $28.26B. Given the growth of the company over the last two quarters, I wouldn't be surprised to see an actual EPS of between $0.61/share and $0.63/share, and revenue between $28.80B and $29.10B.

AT&T

Even though AT&T has only been up about 2.1% for the year, it's still yielding an amazing 5.7% dividend. There are two things long-term investors should consider when buying shares of AT&T. One is the continued growth of the stock - since its October 2008 low of $22.58/share, the stock is up almost 38%. From a yield perspective, the company has continued to increase its dividend every single year since 2004.

Why now is the right time to invest in AT&T: The company has proven expansion and reach capabilities. While Verizon has an ever-expanding 4G LTE network, AT&T too is growing in leaps and bounds in the same space. Most recently, AT&T announced 4G LTE coverage in St. Louis, New York City, and New Orleans. Ever expanding coverage in major cities allows for users to download and stream events faster, not to mention play games and utilize various apps.

Earnings Preview: With AT&T's earnings due out sometime in late April, analysts are estimating an average EPS of $0.57/share. In my opinion, this number is right in line, and consistent with the growth AT&T has experienced. We shouldn't look for any major surprises in the EPS numbers; however, revenue may post a slight upside compared to current estimates. Analysts are a calling for AT&T to generate $31.87B in revenue. This may very well be the quarter where the company tops the $32B mark. I see revenue coming in at $32.05B this quarter.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.