Categories Analysis, Technology

Verizon (VZ) might not see much of roaming revenue for the year due to COVID-19

Adjusted EPS is expected to come in the range of negative 2% to positive 2% for the full year

Verizon Communications (NYSE: VZ) witnessed a 5% decline in total revenues for the second quarter of 2020, due to lower wireless equipment revenue caused by limited in-store engagement and shifts in customer behavior due to the pandemic.

Despite the health crisis impacting search and advertising during the quarter, Verizon was able to improve engagement on some of its owned and operated properties and saw an increase in monthly active users on these platforms.

Verizon Media

Verizon Media saw a drop of 24.5% in total revenue to $1.4 billion, as search and advertising were impacted significantly by the coronavirus pandemic and its effects on the economy. However, the company saw a slight recovery in June with the rate of decline at around 19% versus the prior year.

Despite this setback, monthly active users on its owned and operated properties grew around 4%, with strength in Yahoo Finance and News, both of which grew 45% and 25% respectively.

Verizon saw an increase in client accounts on its demand side platform and also signed partnerships with major content and ecommerce companies. The company entered into an agreement with Walmart (NYSE: WMT) for Yahoo Mail to be used as a grocery and purchasing platform.

The company is seeing a pickup in advertising at a faster pace than search, with strength in owned and operated properties. Based on this, the revenue decline percentage in Verizon Media is anticipated to be in the teens in the third quarter.

5G

Verizon is on track and even ahead of plan with regards to its overall 5G deployment and its work on mobile edge compute and 5G Home cities. The company has rolled out 5G Ultra Wideband in 35 cities thus far, out of the planned 60 and has also moved into its sixth 5G Home market.

Also Read:  Verizon (VZ) Q2 revenue down 5%; earnings drop but beat estimates

Verizon is planning to deploy 10 5G mobile edge compute sites this year and is partnering with firms like IBM in this regard. The company believes there are opportunities for 5G to assist with decision-making and automation in distribution centers and manufacturing facilities. Verizon expects more development in this space during the second half of the year.

Verizon continues to deploy more fiber and additional cell sites to expand its 5G roll-out, and the company expects capital expenditures to total $17.5-18.5 billion in 2020.

Outlook

The travel restrictions brought on by the pandemic led to a reduction in roaming revenue during the quarter. Looking ahead, the shifts in customer behavior due to the health crisis is expected to lead to roaming revenue and travel pass being suppressed for some time.

Verizon expects total wireless revenue in the third quarter to increase sequentially and for the year-over-year growth rate to come in the range of negative 1% to flat.

The company still faces uncertainty due to the COVID-19 situation but has guided for adjusted EPS to come in the range of negative 2% to positive 2% for the full year.

Click here to read the full transcript of Verizon Q2 2020 earnings conference call

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