NEW YORK (TheStreet) -- Shares of Verizon Communications (VZ) are down 3.62% to $47.13 after the nation's largest wireless carrier warned late Monday that its profits are coming under pressure at the end of the year as it rolls out discounts in an effort to win customers, the Wall Street Journal reports.
The carrier also said more of its customers were leaving for other carriers this quarter than in the last quarter, or last year, amid heavy promotions from rivals, the Journal added.
The company said the cost of those promotions would hurt its wireless margins, overall margins and earnings per share, according to the Journal.
Canaccord Genuity maintained its "buy" rating and price target of $56 on the firm today following the news, but warned "higher retail postpaid churn raises the specter of potential share losses and likely rattles investors' nerves if the market leader again shows signs of susceptibility to industry price competition."
Separately, TheStreet Ratings team rates VERIZON COMMUNICATIONS INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate VERIZON COMMUNICATIONS INC (VZ) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, compelling growth in net income, expanding profit margins and growth in earnings per share. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- VZ's revenue growth has slightly outpaced the industry average of 0.9%. Since the same quarter one year prior, revenues slightly increased by 4.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Diversified Telecommunication Services industry and the overall market, VERIZON COMMUNICATIONS INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Diversified Telecommunication Services industry. The net income increased by 65.5% when compared to the same quarter one year prior, rising from $2,232.00 million to $3,695.00 million.
- The gross profit margin for VERIZON COMMUNICATIONS INC is rather high; currently it is at 61.21%. Regardless of VZ's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, VZ's net profit margin of 11.69% compares favorably to the industry average.
- VERIZON COMMUNICATIONS INC has improved earnings per share by 14.1% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, VERIZON COMMUNICATIONS INC increased its bottom line by earning $4.00 versus $0.31 in the prior year. For the next year, the market is expecting a contraction of 13.3% in earnings ($3.47 versus $4.00).
- You can view the full analysis from the report here: VZ Ratings Report