NEW YORK (TheStreet) -- Shares of Verizon Communications (VZ) closed lower by 4.05% to $46.92 on nearly three times its average trading volume on Tuesday, after the nation's largest wireless carrier said that its end-of-the-year promotional discounts and price reductions are cutting into profit.
Verizon warned late Monday that the cost of its discounts in an effort to win customers will likely to hurt its wireless margins, overall margins and earnings per share in the fourth quarter.
The company said it's losing more customers to other carriers this quarter than previous quarters, due to heavy promotions from competitors.
Must Read: Warren Buffett's 25 Favorite Stocks
Also, three firms cut their price target on shares of Verizon this morning.
Citigroup lowered its price target to $50 from its previous $51 with a "hold" rating. Credit Suisse cut its price target to $52 from $54 with a "neutral" rating. And analysts at Robert W. Baird lowered its price target to $50 from $54, also with a "neutral" rating.
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