Verizon's (VZ) - Get Verizon Communications Inc. Report fourth-quarter results fell short of investors expectations, with investors wanting more insight into how its burgeoning media business is going and whether large-scale M&A is in its future, as it seeks to compete with AT&T (T) - Get AT&T Inc. Report .
Excluding items, Verizon earned 86 cents per share on $32.34 billion in revenue. Analysts surveyed by Yahoo! Finance expected the company to earn 89 cents a share on $32.09 billion in revenue for the fourth quarter.
For 2017, Verizon said it expects consolidated revenue to be "fairly consistent" with 2016's results.
After the results, Verizon shares traded sharply lower, falling 4.4% to $50.11 in early Tuesday trading.
Investors were be looking to hear what, if any, progress has been made on closing the Yahoo! (YHOO) acquisition soon, in light of the hacking scandal. Monday evening, Yahoo! said it expected the transaction to close in the second quarter. Verizon followed that up with saying it will continue to work to assess how the breaches affect the merger.
In 2016, Verizon announced it was buying Yahoo! for $4.8 billion, but some have questioned acquisition price could be in flux because of the widespread hacking, which affected nearly 1 billion accounts.
"Verizon heads into 2017 amid several large pending acquisitions in the telecom space," Morgan Stanley analyst Simon Flannery wrote in a note to clients, previewing Verizon's earnings. "The company itself is sitting on a couple of them, with the Yahoo hacking impacts still being evaluated by the team. We are interested in how Verizon plans to respond to the shifting competitive landscape as a result of the pending deals."
In late 2016, AT&T announced its plans to acquire Time Warner (TWX) , which has led to speculation Verizon may seek to acquire a larger media company of its own. Press reports have speculatedCBS (CBS) - Get CBS Corporation Class B Report could be a fit following the Les Moonves-led company not merging with Viacom (VIAB) - Get Viacom Inc. Class B Report .
For his part, CEO Lowell McAdams has stated the company does not need to acquire a large content provider, following the speculation.
Other press reports have bandied that Verizon may seek a deal for a large cable operator, with Charter Communications (CHTR) - Get Charter Communications, Inc. Class A Report being specifically mentioned by McAdams.
Over the past twelve months, shares of Verizon gained nearly 12%, excluding dividends, compared to the near 19% gain in the S&P 500.
Here are three ETFs that may benefit if investors decide they like Verizon's fourth-quarter results.
FIDELITY MSCI TELECOMMUNICATION SERVICES ETF
The $131.5 million FIDELITY MSCI TELECOMMUNICATION SERVICES ETF (FCOM) - Get Fidelity MSCI Communication Services Index ETF Report has Verizon make up 21.3% of its portfolio, charging investors an expense ratio of 0.08%.
In addition to Verizon's M&A strategy, Morgan Stanley's Flannery wondered whether wireless margins were likely to come under pressure because of competition.
"During the quarter, Verizon ramped up promotions in response to lower activity during Black Friday," Flannery penned in a note to clients. "This will pressure wireless margins in the quarter." Morgan Stanley rates Verizon shares overweight with a $54 price target.
Vanguard Telecommunication Services ETF
The $1.48 billion Vanguard Telecommunication Services ETF (VOX) - Get Vanguard Communication Services ETF Report has Verizon make up 20.81% of its portfolio, charging investors an expense ratio of 0.12%.
Oppenheimer analyst Timothy Horan wanted to hear more on what the company will do to return to growth as the competition with Sprint (S) - Get SentinelOne, Inc. Class A Report and T-Mobile US (TMUS) - Get T-Mobile US, Inc. Report over wireless subscriber plans continues to play out. "Looking ahead, we believe stock performance will hinge on the trajectory of 2017 estimates and how quickly the company can return to growth," Horan wrote to clients.
iShares Global Telecom ETF
Drexel Hamilton analyst Barry Sine believes that 2017 will be a year of growth for Verizon, due in part to recent acquisitions. "We look for 2017 to see a return to growth, as its cornucopia of strategic investments in areas like internet of things and digital media start to bear fruit," Sine wrote to clients, previewing Verizon's earnings.
Drexel Hamilton has a buy rating and a $54 price target on shares.