Verizon (VZ) Earnings
Verizon (VZ) posted mixed results. It beat on the bottom line but missed on revenue. Adjusted earnings rose 8.3% to $1.31 per share, above the $1.27 Wall Street expected. Revenue reached $34.3 billion, below the $34.74 billion forecast, an increase of 1.5%. Wireless and broadband growth offset weaker equipment sales.
The standout was phone customers. Verizon (VZ) added 406,000 post-paid phone customers, people who pay a monthly bill, about double what Wall Street expected. That drove shares higher in pre-market trading before they turned lower. Broadband was softer: 314,000 customers added, below expectations. Phone growth was strong, but the improvement was not even across business lines.
Mobility and broadband service revenue rose nearly 3%.
Full-year outlook was raised. Verizon (VZ) now expects 1.1 million to 1.2 million phone net additions, up from the upper half of its prior range. It projects adjusted earnings of $5.04 to $5.06 per share. Free cash flow growth is seen approaching 12%, up from 9% to 10%.
The stock has been under pressure. One reason is the possible competitive threat from Elon Musk's SpaceX moving into the telecom space. Verizon (VZ) has been the outperformer in its peer group even so. Verizon (VZ) and Amazon Web Services signed a $2 billion AI infrastructure deal.
Ross Stores (ROST) Upgrade
UBS upgraded Ross Stores (ROST) to buy from neutral and lifted its price target to $315 from $239, a rise of more than 30%. The stock came into the day up more than 25% year-to-date and up more than 40% year-over-year, and added to those gains.
The case: sales momentum at this value retailer can continue past this year. UBS sees room for Ross (ROST) to catch up with TJX (TJX), the parent of TJ Maxx, Marshalls, and HomeGoods. It believes there is a wider gap than the market realizes in store productivity between Ross (ROST) and TJX (TJX), meaning Ross (ROST) can pull more sales from its existing stores. UBS credits the CEO's strategies with helping narrow that gap. Whether the thesis holds remains to be seen.
FICO (FICO) Downgrade
Wells Fargo downgraded Fair Isaac Corp (FICO) to equal weight from overweight, moving to the sidelines, and cut its price target to $735 from $800. Shares fell more than 6%, dropping to down 6.2% during the segment.
The concern is FICO's (FICO) decision to hold mortgage score pricing steady. FICO (FICO) will keep its $10 price for lenders enrolled in its preferred program. That bundle includes the classic FICO score, the one people check each year, and a newer FICO scoring system that predicts a borrower's ability to repay a mortgage. Wells Fargo had expected a price increase to lift earnings growth; holding prices flat caps that growth. Good for the consumer, worse for the shareholder.
