Write Up of Verizon Communications
-
Upload
geeteshgupta -
Category
Documents
-
view
213 -
download
0
description
Transcript of Write Up of Verizon Communications
Company Name: VERIZON COMMUNICATIONS INC.Address & website: WWW.VERIZON.COM
Sector Industry Established Ticker CEO Next update
Telecommunications
Fixed Line Telecommunications
OCT 7 1983 VZ RATING A-
Lowell C. Mc Adam
Name of the auditor: Ernst & Young LLP
Type of opinion: Unqualified
Financial statements are current/ delinquent: Mostly current when it is a going concern
Litigation risk: Spherix Commences Litigation Against Verizon for Patent Infringement
No. of independent directors: 13
Directors:Shellye Archambeau
Richard CarriónMelanie Healey
M. Frances KeethRobert Lane
Sandra MooseJoseph NeubauerDonald NicolaisenClarence Otis, Jr.
Hugh PriceRodney SlaterKathryn Tesija
Gregory Wasson
Overview of the company-
1. Verizon Communications Inc. operates as a holding company, which provides broadband and other wireless and wireline communications services to consumer, business, and government and wholesale customers.
2. It also provides converged communications, information and entertainment services over America's most advanced fiber-optic network, and delivers integrated business solutions to customers.
3. The company operates its business through two segments: Verizon Wireless and Wireline. The Verizon Wireless segment provides communications products and services including wireless voice and data services and equipment sales, which are provided to consumer, business and government customers across the United States.
4. The Wireline segment provides communications products and services including local exchange and long distance voice service, broadband video and data, IP network services, network access and other services to consumers, small businesses and carriers in the United States, as well as to businesses and government customers.
5. Verizon Communications was founded in 1983 and is headquartered in New York, NY.
Share holdings:
Breakdown
% of Shares Held by All Insider and 5% Owners: 0%
% of Shares Held by Institutional & Mutual Fund Owners: 57%
% of Float Held by Institutional & Mutual Fund Owners: 57%
Number of Institutions Holding Shares: 1492
Funds
Name SharesVanguard Total Stock Mkt Idx 672,83,260
VA College America Cap Inc Bldr 529E 510,31,084
VA College America Invmt Co of Amer 529E 481,97,798
SPDR® S&P 500 ETF 431,65,042
Vanguard 500 Index Inv 428,91,212
Vanguard Institutional Index I 424,01,412
VA College America WA Mutual 529B 370,63,293
VA CollegeAmerica Inc Fund of Amer 529E 348,81,336
VA College America Cap World G/I 529E 299,17,339
Vanguard Wellington™ Inv 292,04,270
Major Direct Holders (Forms 3 & 4)
Holder Shares Reported
MCADAM LOWELL C 2,63,952 Feb 14, 2014SHAMMO FRANCIS 45,835 Feb 14, 2014REED MARC C 36,124 Feb 14, 2014STRATTON JOHN G 35,419 Feb 14, 2014MUDGE W ROBERT 33,329 Feb 14, 2014
Institutions
Name SharesVanguard Group, Inc. 2117,10,287
State Street Corp 1665,38,929
Capital Research Global Investors 1612,13,942
BlackRock Fund Advisors 1315,03,039
Verizon Master Savings Trust 0
Fidelity Management and Research Company 910,52,336
Capital World Investors 837,34,357
Wellington Management Company, LLP 780,36,220
Northern Trust Investments, N.A. 558,26,100
J.P. Morgan Investment Management Inc. 403,59,527
Share price and market cap data in USD – check Yahoo Finance, Morning Star & NasdaqCMP
52 week High (date)
52 week low (date)
Shares O/S (mil)
Free float (mil)
Average volume 3m (mil)
Market Cap (bn)
Rating Information: check respective website. You have to create individual logins. Give a brief relevant commentary as provided by the rating agencies.
Rating Type S&P Moody’s Fitch
Short termA-2 A3
P-2F2
Long Term A A2 A-Outlook Positive Stable Stable
Fitch: Fitch has also assigned an 'A-' rating to Verizon's USD$870 million senior unsecured 4.8% notes due 2044
issued in Taiwan. The Rating Outlook is Stable.
Moody’s: Moody's Investors Service downgraded the senior unsecured long-term debt ratings of Verizon Communications to A2 from A1., Verizon Wireless has been downgraded to A3 from A2 .The Prime-1 short-term debt ratings of Verizon Global Funding and Verizon Network Funding were not on review for downgrade and are confirmed. The outlook for all ratings has been changed from negative to stable.
S&P: Standard & Poor's Ratings Services today revised its rating outlook on Verizon Communications Inc. to positive from stable. At the same time, we affirmed our 'BBB+' corporate credit rating and A-2 short-term rating on the company.
Eg. Of a table providing share price movement of a company
The relevant information can be obtained from Morning Star, Nasdaq, Zacks investment research, gurufocus.com
Country risk premium (%) Beta 0.04Equity risk premium (%) Dividends in 2013 0.5552 week change (%) 0.02 Dividend yield (%) 4.26%S&P 500 index 181.4 Projected yield (%) 4.43%Stock type CLASSIC
GROWTH Price target summary PEG Ratio 1.59Mean 49.55 EPS 2013 4.00Median EPS 2014E 1.01High 53.66 EPS 2015ELow 45.45 P/E 2013 10.50No. of brokers 40 P/E 2014E 16.2Price / Book 3.62 3-Yr historical
growth rates STOCK IND AVERAGE
Price/ Sales 1.17 Sales (%) 4.2 7.1
Price/ cash flow 3.64 Industry
ROA TTM 4.61Operating income (%) 27.5 16.9
ROE TTM 31.94 Net income (%) 12.5 7.5
Debt/ equity 240.99 EPS (%) 64.40
Pitroski score Parameters Score
Net income 1Operating cash flow 1Return on assets 1Quality of earnings 1Long term debt vs. assets 0Current ratio 1Shares outstanding 1Gross margin 1Asset turnover 1
The Pitroski score - http://www.grahaminvestor.com/screens/piotroski-scores/
Score one point if a stock passes each test and zero if it doesn’t. The maximum score is 9.
1. Net Income: Bottom line. Score 1 if last year net income is positive.2. Operating Cash Flow: A better earnings gauge. Score 1 if last year cash flow is positive.3. Return On Assets: Measures Profitability. Score 1 if last year ROA exceeds prior-year ROA.4. Quality of Earnings: Warns of Accounting Tricks. Score 1 if last year operating cash flow exceeds net
income.5. Long-Term Debt vs. Assets: Is Debt decreasing? Score 1 if the ratio of long-term debt to assets is
down from the year-ago value. (If LTD is zero but assets are increasing, score 1 anyway.)6. Current Ratio: Measures increasing working capital. Score 1 if CR has increased from the prior year.7. Shares Outstanding: A Measure of potential dilution. Score 1 if the number of shares outstanding is no
greater than the year-ago figure.8. Gross Margin: A measure of improving competitive position. Score 1 if full-year GM exceeds the prior-
year GM.9. Asset Turnover: Measures productivity. Score 1 if the percentage increase in sales exceeds the
percentage increase in total assets.
Industry – check company annual report, IMF, CIA Factbook, world bank, PWC and general search engine for information on the industry. The write up should be brief and succinct and relevant to the company write up. An outlook should also be provided.
Moat rating: THIS COMPANY VERIZON COMMUNICATIONS HAS MILDER COMPETETIVE ADVANTAGE SUCH THAT CREATING A NARROW MOAT AND HENCE, RATING GIVEN TO THIS COMPANY ON THE BASIS OF THE MOAT IS BBB
Negatives:
1. The monthly calling plans for Verizon Wireless cost more, on average, than competing cellular providers. Users with smart phones also require additional data plans that can be as expensive as home Internet service.
2. Calling Verizon to discuss plans or problems with service can be a nuisance. Often a customer will find that multiple calls will result in different answers by different customer service agents.
3. Verizon is slow implementing new technology, and lacks more sophisticated phones such as AT&T's iPhone.
Positives:
1. Mobile broadband plans range from $15 per month for BlackBerry access and increase to $59.99 per month for a five-gigabyte monthly data allowance. Broadband usage may be accessed through hand-held smart phones, netbooks or laptops.
2. As the country's largest network, Verizon Wireless services over 80 million customers annually. The company has invested over $50 million in creating and expanding its coverage.
Operating performance
Growth ratios (%) FY11 FY12 FY13Revenue growth 4.04 4.48 4.06Gross profit growth 58.62 60.05 62.76EBITDA growth -0.06 -0.03 0.68EBIT growth -0.12 0.02 1.43Pre-tax growth -0.17 -0.06 1.96Net income growth -5.69 -63.6 1213.94
A brief write up on the company’s performance and what have been the growth drivers and if not, what are the factors for the decline in performance.
Liquidity 43944 USD’ MILLIONS IS THE LIQUIDITY OF THE COMPANY INCLUDING WORKING CAPITAL
Competition –
Peer comparison table - latest fiscalsTicker code VZ T SPeer comparison table VERIZON AT&T INC. SPRINT CO.
31-Dec-13 31-Dec-13 31-Dec-13
Revenues 123640 130370 35410
Operating income 31,968 30,479 -970
Operating profit margin % 0.28 0.23 0.07
Net profit/ loss (+/-) 15460 17930 -4670
Net profit margin % 12.50 13.75 -13.19
Cash & short term investments 54,129 3,339 6,364
Property & equipment 88,956 1,10,968 16,164
Goodwill & intangibles 1,06,181 1,31,485 56,272
Short term & long term debt 93,591 74,788 33,011
Equity (Net worth) 38,836 90,988 25,584
Tangible Net worth (TNW) 4,03,179 33,101 90,334
Cash from operations 38,818 34,796 -61
Capital expenditure -17,184 -20,944 -3,993
Dividends -5,936 -9,696 0
Free cash flow 21,634 13,852 -4,054
Ratios
Current ratio 2.62 0.66 1.22
Debt/ Equity 2.41 0.76 1.25
Debt/ TNW 0.23 0.37
Return on equity 12.54 11.17 -0.6
Return on assets 4.61 6.70 -0.18
Ratios
P/E ratio 10.63 10.27 -16.26
Book value per share 13.09 17.41 6.5
Earnings per share/ loss 4.64 3.41 -0.12
Share price 49.71 35.36 6.25
Market cap (in USDbn) 204.32B 181.35B 24.66B
No. of employees 1,77,800 2,48,170 36,000
Credit ratings/ outlook POSITIVE NEAGTIVE STABLE
Moodys BAA1 A3 BA1
S&P A A BB-
Outlook: POSITIVE .
Analyst’s view: NASDAQ: BUYUBS- NEUTRAL
Luminance Knowledge center views –Base case –
Bear case –
Business cycle markers: AD(Of ADITS)
Some of the important aspects to be looked into before making an informed decision are the following:
1. History of the company and the products/ sector they are into. The country in which the company is registered and the sovereign rating of the country.
2. Going through the background of the CEO, the board members and the key executives.3. Investment in R&D as a % of sales, patents filed and the total number of employees in the R&D section
including the Doctorates working in R&D.4. Go through the segmental sales for the last 3 years, including geographical breakup, strength of the
products and the employees in the marketing division. How cyclical is the business? Which quarters provide the best growth periods during the financial year? Any information on the order book?
5. Check if there has been any labour unrest in the past 3 years. Check for any off balance sheet items relating to any contingent liabilities like litigations and pension liabilities and the possible impact on the cash flow.
6. Look into the profitability margins (G/P, EBITDA, O/P, N/P), interest coverage ratio for the last 3 yr P&L, key balance sheet parameters like net worth, total debt along with debt maturity period, cash and investments held, net worth and the FCF held by the company.
7. Make a comparison to the peers based on the above parameters.
8. See if there are any restructuring activities undertaken by the company. What are the intangible assets held by the company and the possible write downs of those in the coming years and the impact on P&L.
9. Check the ratings given by the rating agency and the outlook provided. Macro understanding of the general economy and the external factors that may impact the performance of the company.
10. What are the succession plans in place for those companies which are family run and registered in the emerging markets?
11. Check the share price movement for the past 1-2 years and if there have been any spikes, the reason for the same.
12. Google search on the company for any untoward incidents or scandals that can impact the company’s performance.