At an investor conference hosted by Goldman Sachs on Sept. 17, top executives of big telecom outfits expressed mixed sentiments about the economic recovery but were upbeat about the outlook for the industry. One of them was Verizon Communications Chairman and CEO Ivan G. Seidenberg, who noted that the company weathered the recession better than its peers as it aggressively acquired wireless assets and shed some underperforming wireline operations.
Indeed, Verizon’s stock continues to garner some decent support on Wall Street, with 53 percent of the 32 analysts who track the telecom giant rating it a buy and 44 percent recommending holding the stock, according to Bloomberg data. So far only one analyst rates it a sell. The stock, which traded as high as 44 a share last year, has fallen to 29, although it is holding above its 52-week low of 23 reached on Oct. 10, 2008.
But some of the bulls appear to be having second thoughts. A few analysts have recently downgraded the stock to neutral from buy, citing concerns about deteriorating industry fundamentals.
One of them is John C. Hodulik of investment firm UBS [it has done business with and banking for Verizon], who scaled back his Verizon earnings estimates for 2009 and 2010. As Verizon’s sales from its business customers “continue to worsen” and aren’t likely to improve until 2010, “we now expect Verizon to miss its annual guidance for [earnings-per-share] growth in 2009 due to continued pressure on its wireline business,” says Hodulik. And “cracks are beginning to appear,” he warns, in Verizon’s robust wireless business.
Pressure Remains on Enterprise Business
Verizon is one of the largest providers of wireline, wireless, and Internet broadband services. Through its joint venture with Vodafone Group, the company is the largest U.S. wireless carrier, serving 87.7 million customers. Alltell, which Verizon acquired in…