Citigroup: Stronger Volume, Competition Should Weigh On Verizon's Q4 And 2015 Results

Michael Rollins of Citigroup on Tuesday that Verizon Communications Inc. (NYSE: VZ) strategy of focusing on postpaid accounts and leading network quality is commendable, but the costs of competition and capacity are not fully “encapsulated” in consensus estimates for earnings per share in the fourth quarter 2014 and 2015.

“Continued competition within the wireless category may pressure prices and margin further,” Rollins wrote. "Absence of progress from cutting wireline costs and/or improving wireline revenue performance could dilute earnings per share performance and current valuation.”

Rollins expects Verizon to earn $0.70 per share when it reports fourth quarter results on Thursday. The estimate falls short of the $0.74 per share the Street is looking for. Rollins revenue estimates of $32.57 billion is also below Street estimates of $32.62 billion.

The analyst adds that investors should focus on the spectrum auction results, takeaways and implications along with the company's outlook on wireless pricing and financial implications. Rollins also suggests investors pay attention to any updates on the outlook for key enterprise and business revenue trends, EIP disclosures, the pace of wireline revenue recovery and wireline margin prospects.