On Thursday, Citi reiterated its Buy rating on the stock of Verizon Communications (NYSE:) with a $47.00 price target, after the company announced it was acquiring Frontier Communications (OTC:) (NASDAQ:FYBR) for $38.50 per share in an all-cash transaction. The acquisition is expected to generate cost synergies of approximately $500 million.
Verizon has confirmed its guidance for 2024 and has announced a monthly dividend increase. Additionally, the company expects the Frontier deal to contribute positively to revenue and EBITDA, as well as earnings. The transaction is anticipated to close within 18 months, possibly as early as 2026. Based on estimates for the end of 2025, the deal is valued at approximately 9.5 times EBITDA.
Citi sees the acquisition as strategically beneficial to Verizon, increasing its financial growth through a greater focus on converged mobile and broadband services. The company maintains a positive outlook on Verizon stock. Regarding Frontier, the possibility of receiving competing offers from companies such as T-Mobile and AT&T is noted, due to the industry’s interest in integrated service offerings.
In other recent news, Verizon Communications has announced plans to acquire Frontier Communications in a $20 billion cash transaction. This move is aimed at expanding Verizon’s fiber optic network and increasing its competitive edge. The acquisition is expected to close within 18 months and contribute positively to Verizon’s earnings and adjusted earnings.
Additionally, TD Cowen has maintained a Buy rating for Verizon, following discussions with company executives. The company highlighted Verizon’s readiness to offer Generation AI fiber and complete the deployment of C-Band spectrum by the end of 2025.
In terms of financial performance, Verizon reported a steady increase in results for the second quarter of 2024, with a 3.5% year-over-year increase in wireless service revenue and a combined total revenue of $32.8 billion. The company also reported a 69% YoY increase in its customer base, now exceeding 3.8 million customers.
Adjusted EBITDA for Q2 2024 increased to $12.3 billion, an increase of 2.8% from the previous year. This is a recent development in the company’s operations and financial performance.
InvestingPro Insights
As Verizon Communications (NYSE: VZ ) moved forward with its acquisition of Frontier Communications, the market responded with a cautious but steady outlook. According to InvestingPro data, Verizon has a market capitalization of $174.61 billion, which reflects its presence in the telecommunications sector.
The company’s commitment to shareholder returns is evidenced by its dividend yield of 6.41% on the last dividend payment date of July 10, 2024. This is in line with InvestingPro’s Tip that Verizon has maintained dividend payments for 41 consecutive years, reflecting a reliable dividend. history.
Furthermore, analysts have set their earnings expectations down for the coming period, which can be a point of consideration for investors. Despite this, Verizon stock is known to trade with low price volatility, as noted by another InvestingPro Tip, which may appeal to investors who want portfolio stability. For those interested in exploring further, there are additional InvestingPro Tips available that delve into Verizon’s financial health and market position.
With a P/E ratio of 15.45, Verizon trades at a valuation that reflects a balance between earnings and market expectations. The company’s revenue for the last twelve months in Q2 2024 was $134.24 billion, with a modest profit growth of 0.61% in the most recent quarter. These metrics, coupled with a gross profit margin of 59.85%, reflect Verizon’s financial strength.
Investors looking for more in-depth analysis and additional tips can be found on Verizon’s dedicated InvestingPro page, which offers comprehensive tools and insights to inform investment decisions.
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