Showing strength in a difficult market, Verizon Wireless (VZ) reported earnings for the fourth quarter after adjustments of $.61 per share, a penny below analysts’ forecasts. The company reported a 15% increase in revenues and earnings before adjustments of $0.43 per share, a full 6 cents above the prior year.
In a market environment filled with gloomy results and even more gloomy forecasts, a rational person might have expected that an earnings release narrowly missing analysts’ expectations would have had a positive impact. Not so with Verizon.
Rather, Verizon spent most of Wednesday down by as much as 6%, closing at $29.96, down 3.3% on the day. VZ traded at a 52-week high near $40 in late April and fell to a low of $23 per share in mid October.
So what has led to the reaction of analysts and traders? Certainly not missing the earnings target by a penny. Verizon withheld guidance for the first quarter of 2009 and the full year as well.
Nothing unnerves an analyst like the lack of visibility of future revenue and earnings results.
In Verizon’s case, other information contained in the earnings release provided fodder for believers and skeptics alike.
For the skeptics, Verizon reported less than stellar corporate sales activity and stated that pension contributions required to respond to losses in the pension funds in 2008 would have an impact on earnings by as much as $0.06 per share.
Further negativity came from the evasive company statement with respect to the sale of the Blackberry Storm, which has been plagued by software problems and a delayed launch of the product.
On the positive side, Verizon reported higher than forecast growth of its fiber optic television and internet services system (FiOS). Customers of Verizon’s FiOS have reported high levels of satisfaction with the product, lifting hopes that this product can become a mainstay for the company.
The positive impact of the FiOS product combined with strong earnings and a healthy balance sheet should make VZ a strong investment in 2009 and beyond.
This article was written by Jamie Dlugosch, contributor to InvestorPlace.com. For more actionable insight like this, go to: www.InvestorPlace.com. James F. Dlugosch contributed to this article.
