On Monday, RBC Capital adjusted its outlook on Verizon Communications (NYSE:VZ), raising the stock's price target to $40 from $36 while maintaining a Sector Perform rating. The firm anticipates Verizon will show a year-over-year wireless service revenue growth of 3.1% and will continue to see an increase in customer additions. The focus for the company in the fiscal year 2024 is expected to be on managing customer turnover effectively.
The price target hike to $40 reflects expectations of Verizon's cost efficiency improvements extending beyond fiscal year 2025. For the first quarter of 2024, RBC Capital forecasts Verizon's consolidated revenue to hit $33.0 billion, which is slightly below the consensus estimate of $33.3 billion. This projection represents a marginal year-over-year increase of 0.1%.
RBC Capital's revenue estimate is primarily influenced by a conservative view on wireless equipment revenues, projecting $5.5 billion compared to the consensus estimate of $5.8 billion. Adjusted EBITDA for the first quarter is expected to grow by 1.4% year-over-year to $12.06 billion, aligning closely with the consensus of $12.05 billion.
This growth is consistent with Verizon management's guidance provided in the fourth quarter of 2023, targeting the lower end of the annual guidance range of 1.0% to 3.0%.
Capital expenditures (capex) are estimated to decrease year-over-year, with RBC Capital's estimate matching the consensus at $4.4 billion. This reduction in spending is projected to support free cash flow (FCF) of $3.7 billion, slightly above the consensus estimate of $3.6 billion.
The firm's adjusted earnings per share (EPS) estimate of $1.12 is in line with the consensus, while noting a 7% decline year-over-year attributed to higher interest costs.
InvestingPro Insights
Verizon Communications' (NYSE:VZ) commitment to shareholder returns is reflected in its impressive track record of raising dividends, which has now reached 19 consecutive years, a testament to its financial stability and investor-friendly approach.
This is complemented by the fact that Verizon has maintained dividend payments for an even longer span of 41 years. These attributes are particularly noteworthy for income-focused investors, as the current dividend yield stands at a robust 6.34%, significantly higher than the average yield found in the S&P 500.
Analyzing the company's financial health and stock performance through InvestingPro's real-time data, Verizon's market capitalization is a solid $177.62 billion, and it trades with a price-to-earnings (P/E) ratio of 10.06 based on the last twelve months as of Q4 2023.
Despite a slight revenue contraction of 2.09% over the same period, the company maintains a strong gross profit margin of 59.09%, underlining its efficiency in generating earnings relative to its revenue. Additionally, the stock has experienced a substantial price increase of 34.46% over the past six months, trading near its 52-week high, which indicates a bullish sentiment among investors.
For those seeking further insights and additional InvestingPro Tips, Verizon currently has 9 more tips listed on InvestingPro, which can provide a deeper understanding of the company's prospects and stock behavior. To access these insights and enhance your investment strategy, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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