Verizon Earnings Excitement Muted by AT&T

The set-up may have some caution for Verizon Communications Inc. (NYSE: VZ) ahead of its earnings report.

Earnings came to $0.70 per share, versus $0.67 in the year-ago quarter. Outside of items, earnings grew almost 11% to $0.71 per share, versus $0.64 a year ago. Thomson Reuters was calling for $0.70 per share. First-quarter consolidated revenues rose 3.6% and more than $1 billion to $32.5 billion, just above the $32.44 billion consensus estimate.

Cash from operations was $8.8 billion with $3 billion in free cash flow. During the quarter, the company repurchased 37 million of its shares for $1.2 billion.

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AT&T said that wireless revenues rose 7% from the year-ago quarter, with an operating income margin of 28.3% and EBITDA service margin of 45.4%. Its wireless operating income rose more than 8% to $5.1 billion. More than 2 million new wireless and wireline high-speed broadband connections were added in the first quarter alone. For the telecom giant’s 2014 outlook, AT&T raised full-year revenue growth to be 4% or greater. Capital spending is expected to remain around $21 billion. AT&T ended the quarter with nearly 60 million total branded smartphone subscribers.

As AT&T rose yet again to $36.29 on Tuesday, its stock was down almost 35 at $35.22 on a “sell the news.” As far as why this should have been no surprise at all, keep in mind that the telecom giant’s stock price had rallied almost 15% from under $32 as recently as the start of March. AT&T’s appreciation was strong enough that the yield has fallen to about 5.2% from more than 5.5%.

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Verizon shares were also down 0.8% at $47.55 in mid-day trading on Wednesday, but Verizon’s stock was significantly closer to its 52-week low now. The earnings expectations for Verizon are $0.87 per share earnings on $30.7 billion in revenue. The one caveat for Verizon is that this includes the huge gains from the addition of the rest of the Verizon Wireless stake from Vodafone.