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Verizon Q4 Profit Misses Estimates; Revenue Up 5%

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Verizon Communications Inc. (VZ) reported an adjusted fourth-quarter earnings per share of $0.86, flat with a year ago. On average, 24 analysts polled by Thomson Reuters expected the company to report profit per share of $0.88 for the quarter. Analysts' estimates typically exclude special items. Fourth-quarter 2017 adjusted EPS included a net pre-tax loss from special items of about $2.6 billion: a severance and mark-to-market adjustment of pension and OPEB liabilities of $1.2 billion; and other items. The Tax Cuts and Jobs Act also resulted in a one-time, after-tax increase to earnings provisionally estimated to be approximately $16.8 billion, or $4.10 per share. The cumulative net impact from these items, after tax, was approximately $15.2 billion, or $3.71 per share, in fourth-quarter 2017.

Fourth-quarter GAAP EPS was $4.56, compared with $1.10 in fourth-quarter 2016. Net income attributable to Verizon was $18.67 billion compared to $4.50 billion, prior year.

Fourth-quarter total operating revenues were $34.0 billion, up 5.0 percent from prior year. Analysts expected revenue of $33.26 billion for the quarter. Total Wireless revenues were $23.8 billion, an increase of 1.7 percent year-over-year, and the company's first year-over-year wireless revenue growth in two years. Total wireline revenues increased 0.1 percent to $7.6 billion. On an organic basis, excluding revenues from acquired operations, total wireline revenues declined 3.6 percent. Total Fios revenues grew 2.3 percent, and consumer Fios revenues grew 1.7 percent.

Verizon reported a net increase of 1.2 million retail postpaid connections in fourth-quarter 2017. Net phone additions of 431,000 included 647,000 smartphones, compared with 456,000 smartphone additions in fourth-quarter 2016. Total retail postpaid net adds in fourth-quarter 2017 included 193,000 tablet and 550,000 other connected device net adds, led by wearables.

For full-year 2017, on an adjusted basis, Verizon reported EPS of $3.74, compared with $3.87, prior year. Full-year 2017 consolidated operating revenues were $126.0 billion. On a comparable basis, excluding divestitures and acquisitions (non-GAAP), full-year consolidated revenues declined approximately 2 percent in 2017, compared with 2016.

For 2018, Verizon expects: consolidated revenues to grow at low-single-digit percentage rates on a GAAP basis. The company expects low single-digit percentage growth in adjusted EPS. This is before the impact of tax reform and the revenue recognition standard. Capital spending for 2018 will be in the range of $17.0 billion to $17.8 billion, including the commercial launch of 5G.

Verizon CEO Lowell McAdam said: "In 2018, we look to drive long-term shareholder value by deploying next-generation network services, leveraging global platforms such as Oath, and using our strategic Humanability approach to turn innovative ideas into realities."

The Tax-reform legislation will have a positive impact to cash flow from operations in 2018 of approximately $3.5 billion to $4 billion. The incremental cash flow will be used primarily to strengthen Verizon's balance sheet. Verizon will be increasing contributions to the Verizon Foundation by $200 million to $300 million over the next two years. The new initiatives have a projected EPS impact of 5 to 6 cents for each of the next two years.

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