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Verizon Communications Inc Stock Hold Recommendation Reiterated (VZ)

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

NEW YORK ( TheStreet) -- Verizon Communications (NYSE: VZ) has been reiterated by TheStreet Ratings as a hold with a ratings score of C+ . The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and disappointing return on equity.

  • EXCLUSIVE OFFER: Jim Cramer's Protégé, Dave Peltier, only buys Stocks Under $10 that he thinks could potentially double. See what he's trading today with a 14-day FREE pass

Highlights from the ratings report include:

  • VZ's revenue growth has slightly outpaced the industry average of 3.7%. Since the same quarter one year prior, revenues slightly increased by 5.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • The gross profit margin for VERIZON COMMUNICATIONS INC is rather high; currently it is at 56.50%. Regardless of VZ's high profit margin, it has managed to decrease from the same period last year.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry, implying reduced upside potential.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Diversified Telecommunication Services industry and the overall market on the basis of return on equity, VERIZON COMMUNICATIONS INC underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • Net operating cash flow has decreased to $6,728.00 million or 18.62% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.

Verizon Communications Inc. provides communications, information, and entertainment products and services to consumers, businesses, and governmental agencies worldwide. Verizon has a market cap of $126.49 billion and is part of the technology sector and telecommunications industry. The company has a P/E ratio of 143, above the S&P 500 P/E ratio of 17.7. Shares are up 2.4% year to date as of the close of trading on Tuesday.

You can view the full Verizon Ratings Report or get investment ideas from our investment research center.

--Written by a member of TheStreet Ratings Staff.

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