Here is a synopsis of all five stocks:
Also, a solid balance sheet, adequate liquidity and continuing trend of growing book value were among the positives. However, near-term risks related to its exposure to derivative contracts and lack of clarity on a successor to Warren Buffet remain concerns.
Our six-month target price of $100.00 per share equates to about 21.1X our earnings estimate for 2010. This target price implies an expected total return of 19.8% over that period. This is consistent with our Outperform recommendation on the shares.
Universal’s huge dependence on general market conditions and growth in end-markets increase top-line risks in the event of any adverse conditions. Besides, significant volatility in the cost of commodity lumber products from primary producers is problematic.
The company also derives a large portion of its sales from one single customer, which exposes it to customer concentration risks. In anticipation of a lack of positive catalysts, we maintain an Underperform recommendation.
Adjusted earnings excludes approximately total non-cash charge of 25 cents per share, which includes 19 cents associated with the voluntary incentive program for union-represented employees, 2 cents related to Alltel merger, and 4 cents resulting from Frontier spin-off charges.
Total revenue inched up 2.1% to $26.5 billion from the year-ago quarter and was above the Zacks Consensus Estimate of $26.3 billion.
Retail churn and total churn declined year over year to 1.43% and 1.36%, respectively. Verizon continues to generate low retail post-paid churn at 1.07% during the third quarter. Service ARPU (average revenue per user) inched up 1.8% year over year to $51.99. Data ARPU climbed 19% to $18.61.
Total retail customer base spiked 7.1% to 93.2 million from the year-ago quarter. Net retail post-paid subscriber additions for the quarter were 584,000.
Momentum for the fiber-to-the-premises network (delivering FiOS services) remains strong, having already covered 15.4 million premises. During the quarter, Verizon added 204,000 and 226,000 new customers for its respective FiOS TV and FiOS Internet services, both representing a sequential increase. The company exited the quarter with 3.3 million (up 26.5%) FiOS TV customers and 3.9 million (up 23.9%) FiOS Internet customers.
The penetration rate of both FiOS Internet and FiOS TV surged to approximately 31% and 27.2%, respectively across all markets from the year-ago level of 28.7% and 25.1%. Total broadband and video revenue, including FiOS Internet, FiOS TV and HSI (DSL-based high-speed Internet) increased 20.8% year over year to $1.8 billion.
We believe persistent erosion in access lines continues to hurt wireline revenues and margins as Verizon faces intense competition from cable companies and other alternative services providers. Further, high promotional and restructuring expenses may drag earnings and margins going forward.
Although Verizon continues to expand its 3G wireless and wireline FiOS network footprints, returns from investments in these businesses are highly uncertain. The fourth generation (4G) infrastructure may be an obstacle if other service providers shift to different generation technologies. Thus, we are maintaining our long-term Underperform recommendation on the stock.
For the short term (1-3 months), we are recommending a Hold rating with the Zacks Rank # 3. We believe the continuous investment in its broadband network, strong wireless and FiOS services, gaining share in the retail post-paid market and increasing penetration of smartphones and other data devices will provide positive cushion to the stock.
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