Verizon Cuts Earnings Outlook

Verizon (VZ) lowered its earnings guidance and capital spending forecast for the year, but the company reiterated its overall revenue growth estimate and debt target for 2003.

The company now expects adjusted earnings of $2.56 to $2.60 a share this year, down from a prior forecast of $2.70 to $2.80 a share. The company said it will record costs of 10 cents to 12 cents a share from additional issues that have emerged since the middle of the year, and 4 cents a share in mostly noncash expenses related to a change in the treatment of retiree healthcare obligations.

Shares of Verizon were falling $1.33, or 3.8%, to $33.38 in Instinet premarket trading.

Demand for business voice services remains soft, while demand for consumer landline services has been "impacted by technology substitution," Verizon said. Additionally, the company said certain state and federal regulatory rulings will have an ongoing adverse effect on revenue. The continued growth in DSL and long-distance have somewhat offset the pressure on revenue and expenses.

Verizon Wireless now expects a total of more than 4.5 million net retail customer additions for 2003. Two months ago, the company projected more than 4 million new subscribers.

Verizon expects capital expenditures to total $12 billion to $12.5 billion in 2003, down from its previous guidance of $12.5 billion to $13.5 billion. Verizon stood by its year-end net debt target of $46 billion to $47 billion. The company began the year with a target of $49 billion to $51 billion and revised it in July.

Using generally accepted accounting principles, Verizon projected earnings of $2.18 to $2.22 a share for the year with revenue of $66.7 billion to $68 billion, which would represent growth of 0% to 2% from 2002.

Analysts polled by Thomson First Call are looking for adjusted earnings of $2.73 a share and revenue of $67.5 billion this year.

>To order reprints of this article, click here: Reprints