What Exactly Is Going on With Verizon?
Oct 24th 2013 7:00PM
Updated Oct 24th 2013 7:02PM
It's been a fairly epic quarter for Verizon . In September, the telecom behemoth finally followed through on years of will-they-or-won't-they speculation by buying out the 45% stake in Verizon Wireless held by the UK's Vodafone. And that's not all. According to the latest quarterly earnings report, Verizon's wireless division has made 4G LTE available to 97 percent of the US population.
With this kind of all-consuming coverage, one of the biggest buyouts of all time, and double-digit quarterly sales growth under Verizon's belt, one might wonder -- could the company eventually find itself in danger of maxing out its profitability? Let's take a closer look at its latest financial statistics to find out.
Everything's coming up Verizon
This quarter, the telecom great saw almost all its most vital financial metrics go up from where they'd been a year ago. Overall revenue was up 4% to $30.2 billion, and even with the myriad expenses needed to run a nationwide wireless network Verizon actually managed to retain more of its operating and net profits than it did during Q3 2012. Operating income was $7.1 billion compared to $5.4 billion last year, and the company's net profit was $5.57 billion, a 29% improvement from $4.3 billion.
What goes up must come... down?
Verizon holds the lead for wireless subscribers, with 101 million retail subscribers in the U.S. The company is also close to covering the entire country with its 4G LTE capabilities. Does that mean that Verizon might be overvalued and running out of room to grow?
Short answer: nope. Verizon has made significant progress with its Global IP division in recent years, having created 830,000 route miles of cable that goes across both land and sea. In 2012, Verizon created 12,000 route miles to create the system's backbone, which helps expand network initiatives in Asia, Africa, South America, and Europe. Back in the States, even if Verizon's 4G LTE capabilities cover the entire U.S., the company will still have its work cut out for it keeping the enormous wireless system up to date and adapting to whatever big tech trend comes along next.
This company isn't anywhere close to being overvalued, either. Since Verizon has been able to retain a more sizable amount of its profits than its top competitors, its P/E is currently 11.7 in an industry that averages 26.9. AT&T, meanwhile, trades at 26, and Sprint, having had negative net income for the past several years, isn't even applicable from a P/E perspective.
Can you hear me now?
Even after announcing the third-largest buyout in corporate history, Verizon appeared to barely miss a step on its latest quarterly earnings call. It'll be interesting to see how the company continues to perform as it works on paying off its newly accumulated massive pile of debt, but in the meantime the company has a dominating hold on a hot U.S. wireless technology, is working on expanding its international presence, and has maintained a P/E valuation that suggests there's plenty of room to grow from here.
The article What Exactly Is Going on With Verizon? originally appeared on Fool.com.Fool contributor Caroline Bennett has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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