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Verizon’s EBITDA Is Expected to Rise Modestly in 2Q15

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Verizon’s EBITDA in 2Q15

Earlier in this series, we learned about the expectations for Verizon’s (VZ) performance during 2Q15. The company will report its earnings on July 21, 2015. We learned that Wall Street expects strong YoY (year-over-year) growth in the telecom company’s adjusted EPS (earnings per share) in 2Q15. Wall Street analysts also expect marginal YoY growth in Verizon’s consolidated revenue during the quarter. They expect modest YoY growth in Verizon’s wireless revenue during the quarter. Also, the company’s wireline segment should continue to dampen consolidated YoY revenue growth during the quarter.

According to Wall Street analysts’ consensus as of July 10, 2015, on an adjusted basis Verizon’s EBITDA (earnings before interest, tax, depreciation, and amortization) is expected to rise moderately by ~5% YoY during 2Q15.

Verizon’s EBITDA and better wireline margins in 1Q15

Verizon’s adjusted EBITDA rose ~5.80% YoY to reach ~$11.9 billion during 1Q15. Verizon’s EBITDA margin expanded to ~37.40% during 1Q15 from ~36.80% in 1Q14. This rise was despite a YoY fall in the telecom company’s margin in the wireless segment. The EBITDA margin for Verizon’s wireless division fell slightly YoY by ~0.10% to ~44.80% during 1Q15.

However, the profitability of the telecom company’s wireline division improved YoY during the quarter. The wireline segment’s EBITDA margin grew marginally by ~0.20% YoY to ~22.70% during the quarter.

The rising adoption of FiOS should have positively impacted the wireline margins in 1Q15. Compared to the copper-based solutions of wireline telecom companies—like AT&T (T), CenturyLink (CTL), Windstream (WIN), and Frontier Communications (FTR)—fiber-based offerings are more efficient and more profitable for these companies.

You can get diversified exposure to the largest US telecom company by investing in the iShares Core S&P 500 ETF (IVV). IVV held ~1% in Verizon on June 30, 2015.

Also, you can get exposure to Verizon by investing in the iShares Russell 3000 ETF (IWV). IWV held ~0.80% in the telecom company at the end of June.

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