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Verizon Communications (VZ) has recently been one of the most searched stocks on Zacks.com. Therefore, you may want to examine some of the facts that may shape stock performance in the short term.
The stock of the US’s largest mobile phone carrier has returned +3.2% over the past month, compared with a +6.4% change in the Zachs S&P 500 Composite. The Zacks Wireless National industry, which includes Verizon, is up 6.6% over the period. The key question here is where is the stock likely to go in the near future?
While media releases and rumors about significant changes in a company’s business prospects typically “trend” its stock and lead to immediate price changes, there are a few factors that ultimately govern buying and holding decisions. There is always the basic fact of
Revision of earnings forecast
Here at Zachs, assessing changes in a company’s future earnings projections is our top priority. This is because we believe the present value of future earnings streams is what determines the fair value of a stock.
Our analysis is essentially based on how sell-side analysts covering equities revise their earnings forecasts in light of the latest business developments. As a company’s earnings projections go up, so does its stock’s fair value. Also, if the fair value of a stock is higher than the current market price, investors will tend to buy the stock, resulting in an increase in its price. For this reason, empirical studies have shown that there is a strong correlation between earnings forecast revision trends and short-term stock price movements.
Verizon is expected to post earnings of $1.22 per share this quarter, representing a -9.6% change from the year-ago quarter. Zacks Consensus Estimate has changed by -5.2% over the last 30 days.
The consensus expected profit for the current fiscal year is $4.78, representing a -7.7% change from the previous year. This estimate has changed by -6.9% over the last 30 days.
The consensus expected profit for the next fiscal year is $4.87, a +1.9% change from what Verizon expected to report a year ago. Estimates have changed by -6.8% over the past month.
With an impressive track record of external audits, our proprietary stock valuation tool, Zacks Rank, is a more definitive indicator of a stock’s short-term price performance as it effectively harnesses the power of revised earnings forecasts. The magnitude of the recent change in consensus forecasts, along with three other factors related to earnings forecasts, have pushed Zacks’ rank to third (hold) on Verizon.
The chart below shows the evolution of the company’s 12-month consensus EPS forecast.
12 months EPS
Revenue growth forecast
Revenue growth is arguably the best indicator of a company’s financial health, but if a company can’t grow revenue, nothing happens. After all, it’s nearly impossible for a company to increase revenue over the long term without increasing revenue. Therefore, it is important to know the potential revenue growth rate of the company.
For Verizon, the consensus revenue forecast for the quarter is $33.98 billion, representing a +1.3% year-over-year change. For the current and next fiscal years, the $138.27 billion and $140.23 billion estimates represent +1.1% and +1.4% changes, respectively.
Last Reported Results and Surprise History
Verizon reported revenue of $35.25 billion in its last reported quarter, up +3.5% year over year. At the same time he had EPS of $1.19 and a year ago he was at $1.31.
Compared to the Zacks Consensus estimate of $35.06 billion, the reported revenue represents a surprise +0.55%. EPS surprise was -0.83%.
In the last four quarters, we’ve beaten EPS estimates only once. The company beat consensus earnings estimates every time during this period.
evaluation
You can’t make effective investment decisions without considering stock valuations. When predicting the future price performance of a stock, it is important to determine whether current prices accurately reflect the intrinsic value of the underlying business and the company’s growth prospects.
The current value of a company’s valuation multiples, such as price-to-earnings ratio (P/E), price-to-sales (P/S), price-to-cash-flow (P/CF), Helps to see if it’s fair valued, overvalued or undervalued, but how well its stock price compares to its peers on these parameters is well understood.
As part of the Zacks Style Scores system, the Zacks Value Style Score (which evaluates both traditional and unconventional valuation metrics) classifies stocks into five groups from A to F (A is better than B, B is better than C, and so on). ), which helps identify whether a stock is overvalued, overvalued, or temporarily undervalued.
Verizon is rated A on this metric, indicating that it is trading at a discount to its peers. Click here to see the values of some of the metrics that contributed to this grade.
Conclusion
The facts discussed here, along with plenty of other information about Zacks.com, may help you decide whether the market buzz about Verizon is worth paying attention to. However, Zacks ranked No. 3 suggests it may perform in line with the broader market in the near future.
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Verizon Communications Inc. (VZ) : Free Inventory Analysis Report
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