Verizon Earnings: Additional Price Increases Should Drive Modest Growth

Key Morningstar Metrics for Verizon Communications

• Fair Value Estimate: $53.00
• Morningstar Rating: ★★★★
• Morningstar Economic Moat Rating: Narrow
• Morningstar Uncertainty Rating: Medium

What We Thought of Verizon Communications’ Earnings

Verizon Communications VZ delivered modest growth during the fourth quarter, with wireless service revenue increasing 3.1% year over year. Net postpaid wireless customer additions improved slightly from a year ago. Free cash flow was very strong during the quarter but benefited from the sale of wireless towers.

Why it matters: Verizon remains content to cede most, but not all, wireless market growth to T-Mobile TMUS, AT&T T, and cable companies. Critically, the firm remains confident it can increase prices and still add customers, with another round of rate changes announced earlier this month.

• Postpaid phone net additions increased to 568,000 during the quarter from 449,000 last year but would have been flat excluding Verizon’s “second number” offering. We expect rivals added more than 2 million during the period, continuing to gradually chip away at Verizon’s market share lead.
• Revenue per consumer postpaid wireless accounts increased 4% year over year to $140. By our calculation, higher prices and the adoption of premium offerings drove nearly 80% of this growth. Continued success with fixed-wireless broadband delivered most of the remainder.

The bottom line: We don’t expect to materially change our fair value estimate of $53 per share. With Verizon trading more than 20% below this figure, we believe the stock is the most attractive of the three major US wireless carriers.

• The favorable structure of the US wireless industry is the primary basis for our narrow moat rating on Verizon. We expect smaller rivals T-Mobile and AT&T to gradually gain share, limiting Verizon’s growth. Management expects wireless service growth of 2.0%-2.8% in 2025 versus 3.1% in 2024.

Between the lines: Free cash flow hit $19.8 billion in 2024, up from $18.7 billion in 2023. The sale of wireless towers in December inflated operating cash flow by $2 billion. However, Verizon also made $600 million in severance payments and absorbed $3.3 billion of additional taxes during the year.