February 28, 2016
NYSE: VZ
VERIZON COMMUNICATIONS INC
BUY
A+
A
A-
HOLD
B+
B
Annual Dividend Rate
$2.26
B-
C+
C
Annual Dividend Yield
4.42%
SELL
C-
D+
D
Beta
0.20
Sector: Telecom
E+
E
E-
F
BUY
Market Capitalization
$208.2 Billion
SMA (50)
RATING SINCE
TARGET PRICE
52-Week Range
$38.06-$51.30
Sub-Industry: Integrated Telecommunication Services
Weekly Price: (US$)
VZ BUSINESS DESCRIPTION
Verizon Communications Inc., through its
subsidiaries, provides communications,
information, and entertainment products and
services to consumers, businesses, and
governmental agencies worldwide.
D-
03/24/2015
$59.03
Price as of 2/25/2016
$51.11
Source: S&P
SMA (100)
1 Year
2 Years
60
TARGET
TARGET
TARGETPRICE
PRICE
PRICE$59.03
$59.03
$59.03
58
55
53
STOCK PERFORMANCE (%)
3 Mo.
Price Change
13.78
1 Yr.
3.88
3 Yr (Ann)
3.78
12 Mo.
3.57
85.75
74.10
3 Yr CAGR
4.35
173.39
141.57
Ind Avg
44.29
28.29
16.82
S&P 500
12.28
14.59
13.97
50
48
GROWTH (%)
Last Qtr
3.19
341.64
344.44
Revenues
Net Income
EPS
43
Rating History
BUY
HOLD
BUY
Volume in Millions
RETURN ON EQUITY (%)
VZ
108.83
78.26
29.60
Q4 2015
Q4 2014
Q4 2013
45
2,000
1,000
2014
2015
0
2016
COMPUSTAT for Price and Volume, TheStreet Ratings, Inc. for Rating History
P/E COMPARISON
RECOMMENDATION
We rate VERIZON COMMUNICATIONS INC (VZ) a BUY. This is based on the convergence of positive
investment measures, which should help this stock outperform the majority of stocks that we rate. The
company's strengths can be seen in multiple areas, such as its compelling growth in net income, revenue
growth, notable return on equity, expanding profit margins and good cash flow from operations. We feel its
strengths outweigh the fact that the company has had generally high debt management risk by most
measures that we evaluated.
11.70
18.04
21.53
VZ
Ind Avg
S&P 500
HIGHLIGHTS
The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500
and the Diversified Telecommunication Services industry. The net income increased by 341.6% when
compared to the same quarter one year prior, rising from -$2,231.00 million to $5,391.00 million.
2014
Q4 1.32
Q3 0.99
Q2 1.04
Q1 1.02
VZ's revenue growth trails the industry average of 15.2%. Since the same quarter one year prior, revenues
slightly increased by 3.2%. Growth in the company's revenue appears to have helped boost the earnings per
share.
Q4 -0.54
Q3 0.89
Q2 1.01
Q1 1.15
Q3 0.78
2013
Q4 1.76
Q2 0.78
Q1 0.68
EPS ANALYSIS¹ ($)
2015
NA = not available NM = not meaningful
1 Compustat fiscal year convention is used for all fundamental
data items.
The company's current return on equity greatly increased when compared to its ROE from the same quarter
one year prior. This is a signal of significant strength within the corporation. Compared to other companies in
the Diversified Telecommunication Services industry and the overall market, VERIZON COMMUNICATIONS
INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
The gross profit margin for VERIZON COMMUNICATIONS INC is rather high; currently it is at 57.06%. It has
increased from the same quarter the previous year. Along with this, the net profit margin of 15.73% is above
that of the industry average.
Net operating cash flow has increased to $10,504.00 million or 40.54% when compared to the same quarter
last year. Despite an increase in cash flow, VERIZON COMMUNICATIONS INC's average is still marginally
south of the industry average growth rate of 45.74%.
This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2015. All rights reserved.
Report Date: February 28, 2016
PAGE 1
February 28, 2016
NYSE: VZ
VERIZON COMMUNICATIONS INC
Sector: Telecom Integrated Telecommunication Services Source: S&P
Annual Dividend Rate
$2.26
Annual Dividend Yield
4.42%
PEER GROUP ANALYSIS
AB
OR
TLK
The industry is mature, cyclical, capital intensive, and undergoing consolidation and globalization. The recent
M&A trend, ongoing regulatory liberalization, and privatization have fueled competition in local telephone
services markets and expansion into domestic and cross-border markets. The industry has high entry barriers
due to the dominance of well-established players, strong brand identities, high levels of automation, and
distribution challenges.
15%
CHU
BT
TEF
R
VO
FA
LE
AB
-25%
UN
Revenue Growth (TTM)
NTT
TI.A TI
52.5%
EBITDA Margin (TTM)
Companies with higher EBITDA margins and
revenue growth rates are outperforming companies
with lower EBITDA margins and revenue growth
rates. Companies for this scatter plot have a market
capitalization between $18.3 Billion and $229.9
Billion. Companies with NA or NM values do not
appear.
*EBITDA – Earnings Before Interest, Taxes, Depreciation and
Amortization.
V
FA
15%
T
AB
OR
BCE
CHT
VZ
NTT
CHU
BT
UN
R
VO
FA
TEF
LE
AB
-25%
The US Federal Government, through the Communications Act of 1934, established the Federal
Communications Commission to regulate and retain jurisdiction over use of the radio spectrum, interstate
telecommunications, and international communication that originates or terminates in the US. Deregulation
has occurred since the break-up of AT&T in 1982 and rendered the market more competitive. The industry is
regulated by the US Telecommunications Act of 1996 and 2005, which aims to abolish cross-market barriers
and prohibit dominant players from operating within one communications industry.
LE
TLK
Growth is driven by technological advances and demand for integrated high bandwidth data transmission.
Most companies are seeking new market segments, such as mobile communications, digital data
transmission, and value added services. The changing pace of technology implementation and convergence
of cable network technologies through bundling have redefined the competitive landscape. However, the
recent launch of cable telephony, VoIP, and improved wireless and cellular technologies pose a threat to
traditional wired telecommunication services.
Industry outlook is weak due to a significant drop in subscriber additions, shifting consumer preferences, and
a shift towards wireless connections. The government’s $7.2 billion stimulus package provides $4.7 billion to
establish a Broadband Technology Opportunities Program at NTIA for wireline, wireless, and cable
companies, and provides $2.5 billion for broadband grant, loan, and loan guarantee programs at to be used by
rural wireline telecoms and satellite providers. Service upgrades, which are supported by advanced high-end
3G and 4G networks, introduction of low-cost integrated IP voice and data networks, and the deregulation of
the industry, are likely to revive the industry from its present downturn.
REVENUE GROWTH AND EARNINGS YIELD
Revenue Growth (TTM)
Price as of 2/25/2016
$51.11
LE
VZ
TI TI.A
52-Week Range
$38.06-$51.30
The US diversified telecommunications services industry provides communications and high-density data
transmission through high bandwidth/fiber-optic cable networks. The industry is classified into two
sub-categories, alternative carriers and integrated telecommunication services. There are three parallel
markets, terrestrial networks, cellular networks, and satellite networks, which include major players such as
AT&T (T), Verizon Communications (VZ), and Centurylink (CTL).
V
FA
T
2%
Market Capitalization
$208.2 Billion
INDUSTRY ANALYSIS
REVENUE GROWTH AND EBITDA MARGIN*
27.5%
Beta
0.20
9%
Earnings Yield (TTM)
Companies that exhibit both a high earnings yield
and high revenue growth are generally more
attractive than companies with low revenue growth
and low earnings yield. Companies for this scatter
plot have revenue growth rates between -21.6% and
10.8%. Companies with NA or NM values do not
appear.
PEER GROUP: Diversified Telecommunication Services
Recent
Ticker
Company Name
Price ($)
VZ
VERIZON COMMUNICATIONS I 51.11
NTT
NIPPON TELEGRAPH & TELEPHONE 41.98
BT
BT GROUP PLC
33.86
TEF
TELEFONICA SA
10.44
BCE
BCE INC
43.04
CHU
CHINA UNICOM (HONG KONG) LTD 11.44
TLK
TELEKOMUNIKASI INDONESIA
49.54
CHT
CHUNGHWA TELECOM LTD
31.60
T
AT&T INC
37.37
TI
TELECOM ITALIA SPA
9.96
TI.A
TELECOM ITALIA SPA
8.01
Market
Cap ($M)
208,214
88,007
67,463
51,941
37,247
27,395
24,968
24,514
229,871
18,274
18,274
Price/
Earnings
11.70
15.84
15.75
22.70
14.44
19.07
23.48
18.81
15.83
38.31
30.81
Net Sales
TTM ($M)
131,620.00
94,854.48
25,678.95
52,445.75
21,514.00
44,142.04
7,017.78
7,068.92
146,801.00
22,907.44
22,907.44
Net Income
TTM ($M)
17,879.00
5,587.02
3,620.92
5,142.64
2,676.00
1,509.21
1,032.27
1,305.89
13,345.00
793.84
793.84
The peer group comparison is based on Major Integrated Telecommunication Services companies of comparable size.
This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2015. All rights reserved.
Report Date: February 28, 2016
PAGE 2
February 28, 2016
NYSE: VZ
VERIZON COMMUNICATIONS INC
Sector: Telecom Integrated Telecommunication Services Source: S&P
Annual Dividend Rate
$2.26
Annual Dividend Yield
4.42%
Beta
0.20
Market Capitalization
$208.2 Billion
52-Week Range
$38.06-$51.30
Price as of 2/25/2016
$51.11
COMPANY DESCRIPTION
Verizon Communications Inc., through its subsidiaries,
provides communications, information, and
entertainment products and services to consumers,
businesses, and governmental agencies worldwide. The
company's Wireless segment offers wireless voice and
data services; messaging services; service that enables
its customers to access the Internet on smartphones,
basic phones, notebook computers, and tablets;
customers and business-focused multimedia offerings;
location-based services; global data services; LTE
Internet, a high-speed Internet service; and network
access and value added services to support
telemetry-type applications. It also offers
machine-to-machine services that support devices used
in health monitoring, education, manufacturing, utilities,
distribution, and consumer products markets, as well as
offers smartphones and basic phones, tablets, and other
Internet access devices. As of October 12, 2015, it had
109.5 million retail connections. Its Wireline segment
provides high-speed Internet, FiOS Internet, and FiOS
Video services; voice services, such as local exchange,
regional and long distance calling, and voice messaging
services, as well as VOIP services; private Internet
protocol and Ethernet access and optical services; and
Internet protocol, infrastructure and cloud services,
machine-to-machine services, security, and other
communications services. It also offers voice and data
services, such as conferencing and contact center
solutions, and private line and data access networks, as
well as customer premise equipment, installation,
maintenance, and site services; and data, voice, local
dial tone, and broadband services primarily to local, long
distance, and other carriers. The company has a strategic
partnership with AdMobilize. The company was formerly
known as Bell Atlantic Corporation and changed its name
to Verizon Communications Inc. in June 2000. Verizon
Communications Inc. was founded in 1983 and is based
in New York, New York.
STOCK-AT-A-GLANCE
Below is a summary of the major fundamental and technical factors we consider when determining our
overall recommendation of VZ shares. It is provided in order to give you a deeper understanding of our rating
methodology as well as to paint a more complete picture of a stock's strengths and weaknesses. It is
important to note, however, that these factors only tell part of the story. To gain an even more comprehensive
understanding of our stance on the stock, these factors must be assessed in combination with the stock’s
valuation. Please refer to our Valuation section on page 5 for further information.
VERIZON COMMUNICATIONS INC
1095 Avenue of the Americas
New York, NY 10036
USA
Phone: 212-395-1000
http://www.verizon.com
THESTREET RATINGS RESEARCH METHODOLOGY
FACTOR
SCORE
5.0
Growth
out of 5 stars
weak
Measures the growth of both the company's income statement and
cash flow. On this factor, VZ has a growth score better than 90% of the
stocks we rate.
strong
5.0
Total Return
out of 5 stars
weak
Measures the historical price movement of the stock. The stock
performance of this company has beaten 90% of the companies we
cover.
strong
5.0
Efficiency
out of 5 stars
weak
Measures the strength and historic growth of a company's return on
invested capital. The company has generated more income per dollar of
capital than 90% of the companies we review.
strong
4.5
Price volatility
out of 5 stars
weak
Measures the volatility of the company's stock price historically. The
stock is less volatile than 80% of the stocks we monitor.
strong
5.0
Solvency
out of 5 stars
weak
Measures the solvency of the company based on several ratios. The
company is more solvent than 90% of the companies we analyze.
strong
4.5
Income
out of 5 stars
weak
Measures dividend yield and payouts to shareholders. The company's
dividend is higher than 80% of the companies we track.
strong
TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both
price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to
perform against a general benchmark of the equities market and interest rates. While our model is
quantitative, it utilizes both subjective and objective elements. For instance, subjective elements include
expected equities market returns, future interest rates, implied industry outlook and forecasted company
earnings. Objective elements include volatility of past operating revenues, financial strength, and company
cash flows.
Our model gauges the relationship between risk and reward in several ways, including: the pricing drawdown
as compared to potential profit volatility, i.e.how much one is willing to risk in order to earn profits; the level of
acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings
growth; and the financial strength of the underlying company as compared to its stock's valuation as
compared to projected earnings growth; and the financial strength of the underlying company as compared
to its stock's performance. These and many more derived observations are then combined, ranked, weighted,
and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of
selecting stocks.
This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2015. All rights reserved.
Report Date: February 28, 2016
PAGE 3
February 28, 2016
NYSE: VZ
VERIZON COMMUNICATIONS INC
Sector: Telecom Integrated Telecommunication Services Source: S&P
Annual Dividend Rate
$2.26
Annual Dividend Yield
4.42%
Consensus EPS Estimates² ($)
IBES consensus estimates are provided by Thomson Financial
1.06
3.99 E
4.10 E
Q1 FY16
2016(E)
2017(E)
Market Capitalization
$208.2 Billion
52-Week Range
$38.06-$51.30
Price as of 2/25/2016
$51.11
FINANCIAL ANALYSIS
VERIZON COMMUNICATIONS INC's gross profit margin for the fourth quarter of its fiscal year 2015 is
essentially unchanged when compared to the same period a year ago. The company has grown sales and net
income during the past quarter when compared with the same quarter a year ago, however, it was unable to
keep up with the growth of the average competitor within its industry. VERIZON COMMUNICATIONS INC has
weak liquidity. Currently, the Quick Ratio is 0.53 which shows a lack of ability to cover short-term cash needs.
The company's liquidity has decreased from the same period last year.
At the same time, stockholders' equity ("net worth") has greatly increased by 33.58% from the same quarter
last year. Overall, the key liquidity measurements indicate that the company is in a position in which financial
difficulties could develop in the future.
STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the
next 12-months. To learn more visit www.TheStreetRatings.com.
INCOME STATEMENT
Net Sales ($mil)
EBITDA ($mil)
EBIT ($mil)
Net Income ($mil)
Beta
0.20
Q4 FY15
34,254.00
13,783.00
9,744.00
5,391.00
Q4 FY14
33,192.00
1,932.00
-2,136.00
-2,231.00
Q4 FY15
5,070.00
244,640.00
110,194.00
16,428.00
Q4 FY14
11,153.00
232,708.00
113,271.00
12,298.00
Q4 FY15
57.06%
40.23%
28.45%
0.54
7.30%
108.83%
Q4 FY14
56.61%
5.82%
-6.44%
0.55
4.13%
78.26%
Q4 FY15
0.64
0.87
1,357.00
7.18
Q4 FY14
1.06
0.90
1,334.00
-1.60
Q4 FY15
4,073
0.57
1.32
4.03
NA
17,744,808
Q4 FY14
4,155
0.55
-0.54
2.96
NA
13,664,092
BALANCE SHEET
Cash & Equiv. ($mil)
Total Assets ($mil)
Total Debt ($mil)
Equity ($mil)
PROFITABILITY
Gross Profit Margin
EBITDA Margin
Operating Margin
Sales Turnover
Return on Assets
Return on Equity
DEBT
Current Ratio
Debt/Capital
Interest Expense
Interest Coverage
SHARE DATA
Shares outstanding (mil)
Div / share
EPS
Book value / share
Institutional Own %
Avg Daily Volume
2 Sum of quarterly figures may not match annual estimates due to
use of median consensus estimates.
This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2015. All rights reserved.
Report Date: February 28, 2016
PAGE 4
February 28, 2016
NYSE: VZ
VERIZON COMMUNICATIONS INC
Sector: Telecom Integrated Telecommunication Services Source: S&P
Annual Dividend Rate
$2.26
Annual Dividend Yield
4.42%
RATINGS HISTORY
Our rating for VERIZON COMMUNICATIONS INC
has not changed since 3/24/2015. As of 2/25/2016,
the stock was trading at a price of $51.11 which is
.4% below its 52-week high of $51.30 and 34.3%
above its 52-week low of $38.06.
BUY: $49.41
HOLD: $47.15
BUY: $46.29
2 Year Chart
Market Capitalization
$208.2 Billion
$50
Price/Earnings
$48
2015
1
2
3
5
1
2
3
4
5
Price reflects the closing price as of the date listed, if available
RATINGS DEFINITIONS &
DISTRIBUTION OF THESTREET RATINGS
Price/Book
(as of 2/25/2016)
32.19% Buy - We believe that this stock has the
opportunity to appreciate and produce a total return of
more than 10% over the next 12 months.
35.29% Hold - We do not believe this stock offers
conclusive evidence to warrant the purchase or sale of
shares at this time and that its likelihood of positive total
return is roughly in balance with the risk of loss.
32.52% Sell - We believe that this stock is likely to
decline by more than 10% over the next 12 months, with
the risk involved too great to compensate for any
possible returns.
TheStreet Ratings
14 Wall Street, 15th Floor
New York, NY 10005
www.thestreet.com
Research Contact: 212-321-5381
Sales Contact: 866-321-8726
2
3
premium
4
5
Price/Sales
1
2
premium
3
4
5
Price to Earnings/Growth
4
5
discount
1
2
3
premium
4
5
discount
VZ NM
Peers 0.78
• Neutral. The PEG ratio is the stock’s P/E divided by
the consensus estimate of long-term earnings
growth. Faster growth can justify higher price
multiples.
• VZ's negative PEG ratio makes this valuation
measure meaningless.
Earnings Growth
1
2
3
4
lower
5
higher
VZ 74.10
Peers 42.47
• Higher. Elevated earnings growth rates can lead to
capital appreciation and justify higher
price-to-earnings ratios.
• VZ is expected to have an earnings growth rate that
significantly exceeds its peers.
Sales Growth
discount
VZ 1.58
Peers 1.67
• Average. In the absence of P/E and P/B multiples,
the price-to-sales ratio can display the value
investors are placing on each dollar of sales.
• VZ is trading at a valuation on par with its industry
on this measurement.
3
VZ 5.35
Peers 5.97
• Discount. The P/CF ratio, a stock’s price divided by
the company's cash flow from operations, is useful
for comparing companies with different capital
requirements or financing structures.
• VZ is trading at a discount to its peers.
discount
VZ 12.67
Peers 7.82
• Premium. A higher price-to-book ratio makes a
stock less attractive to investors seeking stocks
with lower market values per dollar of equity on the
balance sheet.
• VZ is trading at a significant premium to its peers.
2
premium
discount
VZ 12.47
Peers 16.72
• Discount. A lower price-to-projected earnings ratio
than its peers can signify a less expensive stock or
lower future growth expectations.
• VZ is trading at a discount to its peers.
1
1
Price/CashFlow
discount
premium
To
Buy
Hold
Buy
4
VZ 11.70
Peers 18.04
• Discount. A lower P/E ratio than its peers can
signify a less expensive stock or lower growth
expectations.
• VZ is trading at a significant discount to its peers.
Price/Projected Earnings
From
Hold
Buy
Buy
Price as of 2/25/2016
$51.11
$53
premium
MOST RECENT RATINGS CHANGES
Date
Price
Action
3/24/15
$49.41
Upgrade
1/23/15
$47.15 Downgrade
2/25/14
$46.29 No Change
52-Week Range
$38.06-$51.30
VALUATION
BUY. This stock's P/E ratio indicates a discount compared to an average of 18.04 for the Diversified
Telecommunication Services industry and a discount compared to the S&P 500 average of 21.53. For
additional comparison, its price-to-book ratio of 12.67 indicates a significant premium versus the S&P 500
average of 2.56 and a significant premium versus the industry average of 7.82. The price-to-sales ratio is
below both the S&P 500 average and the industry average, indicating a discount. The valuation analysis
reveals that, VERIZON COMMUNICATIONS INC seems to be trading at a discount to investment alternatives
within the industry.
$45
2014
Beta
0.20
1
2
3
lower
4
5
higher
VZ 3.57
Peers 1.43
• Higher. A sales growth rate that exceeds the
industry implies that a company is gaining market
share.
• VZ has a sales growth rate that significantly
exceeds its peers.
DISCLAIMER:
The opinions and information contained herein have been obtained or derived from sources believed to be reliable, but
TheStreet Ratings cannot guarantee its accuracy and completeness, and that of the opinions based thereon. Data is provided
via the COMPUSTAT® Xpressfeed product from Standard &Poor's, a division of The McGraw-Hill Companies, Inc., as well as
other third-party data providers.
TheStreet Ratings is a division of TheStreet, Inc., which is a publisher. This research report contains opinions and is provided
for informational purposes only. You should not rely solely upon the research herein for purposes of transacting securities or
other investments, and you are encouraged to conduct your own research and due diligence, and to seek the advice of a
qualified securities professional, before you make any investment. None of the information contained in this report constitutes,
or is intended to constitute a recommendation by TheStreet Ratings of any particular security or trading strategy or a
determination by TheStreet Ratings that any security or trading strategy is suitable for any specific person. To the extent any of
the information contained herein may be deemed to be investment advice, such information is impersonal and not tailored to the
investment needs of any specific person. Your use of this report is governed by TheStreet, Inc.'s Terms of Use found at
http://www.thestreet.com/static/about/terms-of-use.html.
This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2015. All rights reserved.
Report Date: February 28, 2016
PAGE 5