Verizon shares dropped nearly 2.5 percent Thursday morning after the carrier posted first quarter results that barely managed to meet earnings per share (EPS) expectations and missed on revenue estimates.
The carrier reported first quarter EPS of $1.06 on revenue of $32.71 billion. The latter figure was nearly $320 million below the average analyst estimate of $32.46 billion provided by Thomson Reuters.
Revenue, while short of the average predictions, was in line with a lowered estimate of $32.1 billion released by Pacific Crest Securities on Tuesday. The number was up 0.6 percent from $31.98 billion during the same quarter last year, but was down sequentially from revenue of $34.25 billion in the fourth quarter 2015.
Total revenues for the wireless segment were $22 billion, down 1.5 percent year-over-year. Service revenues plus installment billings increased 1.6 percent year-over-year.
Verizon warned the outlook for second quarter earnings may not be much brighter.
The carrier said its second quarter results could be weighed down by negotiations to end the ongoing strike of some 40,000 Verizon wireline workers in the Northeast.
“Verizon continues to expect full-year 2016 adjusted earnings to be at a level comparable to the company’s strong full-year 2015 adjusted earnings,” the company said in a statement. “However, given the status of labor contract negotiations, there will be pressure on second-quarter earnings due to the timing of cost reductions.”
In the first quarter, Verizon brought in 640,000 postpaid net additions, down significantly from 1.5 million in the fourth quarter 2015 but up from 13.3 percent from 565,000 the year prior. For net postpaid phone additions, the carrier posted a loss of 8,000 for the quarter, compared to a loss of 138,000 a year ago.
The carrier also lost 177,000 prepaid subscribers during the quarter. Shammo said Verizon is aware it’s prices are above the market and it’s not very competitive in that space, but said the carrier is focused on making sure it doesn’t migrate its “high quality” postpaid base to a prepaid product.
According to Verizon, 452,000 of its net additions were 4G smartphones. The company noted approximately 85 percent of its base is on a smartphone and about 92 percent of its total data traffic travels on its LTE network. Traffic is up 50 percent year over year, Verizon said.
Approximately 68 percent of activations in the quarter were made on installment plans and the carrier said 33 percent of its postpaid phone base is now on an installment plan. Nearly half of Verizon’s postpaid phone base is now on unsubsidized pricing, the carrier said.
Churn for the quarter improved seven basis points year-over-year, dipping to 0.96 percent. Shammo said churn has flattened out and the first quarter will likely set the tone for the rest of the year.