Verizon Communications Inc Net Income jumped on 85.8% in 2015 and EBITDA Margin increased on 8.9 pp from 28.4% to 37.3%
21 Jan 2016 • About Verizon Communications Inc (
$VZC) • By InTwits
Verizon Communications Inc reported 2015 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Verizon Communications Inc has high CAPEX intensity: 5 year average CAPEX/Revenue was 13.9%. At the same time it's in pair with industry average of 12.2%.
- CAPEX is quite volatile: 2,516 in 2015, 4,103 in 2014, 9,997 in 2013, 14,978 in 2012, 20,502 in 2011
- The company has highly profitable business model: ROIC is at 19.3%
- It operates with high leverage: Net Debt/EBITDA is 2.1x while industry average is 1.4x
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.
Verizon Communications Inc ($VZC) key annual financial indicators
| mln. $ | 2011 | 2012 | 2013 | 2014 | 2015 | 2015/2014 |
|---|
P&L
|
|---|
| Revenue | 110,875 | 115,846 | 120,550 | 127,079 | 131,620 | 3.6% |
| Gross Profit | 65,000 | 69,571 | 75,663 | 77,148 | 79,063 | 2.5% |
| SG&A | 35,624 | 39,951 | 27,089 | 41,016 | 29,986 | -26.9% |
| EBITDA | 29,376 | 29,620 | 48,574 | 36,132 | 49,077 | 35.8% |
| Net Income | 2,404 | 875 | 11,497 | 9,625 | 17,879 | 85.8% |
Balance Sheet
|
|---|
| Cash | 13,362 | 3,093 | 53,528 | 10,598 | 4,470 | -57.8% |
| Short Term Debt | 4,849 | 4,433 | 3,933 | 2,735 | 6,489 | 137.3% |
| Long Term Debt | 50,303 | 47,618 | 89,658 | 110,536 | 103,240 | -6.6% |
Cash flow
|
|---|
| Capex | 16,244 | 16,175 | 16,604 | 17,191 | 17,775 | 3.4% |
Ratios
|
|---|
| Revenue growth | 4.0% | 4.5% | 4.1% | 5.4% | 3.6% | |
| EBITDA growth | -5.4% | 0.8% | 64.0% | -25.6% | 35.8% | |
| Gross Margin | 58.6% | 60.1% | 62.8% | 60.7% | 60.1% | -0.6% |
| EBITDA Margin | 26.5% | 25.6% | 40.3% | 28.4% | 37.3% | 8.9% |
| Net Income Margin | 2.2% | 0.8% | 9.5% | 7.6% | 13.6% | 6.0% |
| SG&A, % of revenue | 32.1% | 34.5% | 22.5% | 32.3% | 22.8% | -9.5% |
| CAPEX, % of revenue | 14.7% | 14.0% | 13.8% | 13.5% | 13.5% | -0.0% |
| ROIC | 7.8% | 8.0% | 16.7% | 10.1% | 19.3% | 9.2% |
| ROE | 6.5% | 2.5% | 31.9% | 37.6% | 124.5% | 86.8% |
| Net Debt/EBITDA | 1.4x | 1.7x | 0.8x | 2.8x | 2.1x | -0.7x |
Revenue and profitability
The company's Revenue increased on 3.6% in 2015. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased slightly on 0.93 pp from 6.4% to 7.3% in 2015.
Gross Margin decreased slightly on 0.64 pp from 60.7% to 60.1% in 2015. SG&A as a % of Revenue decreased on 9.5 pp from 32.3% to 22.8% in 2015.
Net Income marign increased on 6.0 pp from 7.6% to 13.6% in 2015.
Capital expenditures (CAPEX) and working capital investments
In 2015 the company had CAPEX/Revenue of 13.5%. Verizon Communications Inc's CAPEX/Revenue showed almost no change from 2012 to 2015. Average CAPEX/Revenue for the last three years was 13.6%.
Return on investment
The company operates at high and attractive ROE (124.48%) while ROIC is a bit lower (19.34%). ROIC increased on 9.2 pp from 10.1% to 19.3% in 2015. ROE surged on 86.8 pp from 37.6% to 124% in 2015.
Leverage (Debt)
Company's Net Debt / EBITDA is 2.1x and Debt / EBITDA is 2.2x. Net Debt / EBITDA dropped on 0.7x from 2.8x to 2.1x in 2015. Debt decreased on 3.1% in 2015 while cash dropped on 57.8% in 2015.
Valuation
Verizon Communications Inc's trades at EV/EBITDA 2.2x and P/E 0.1x while industy averages are 10.5x and 26.1x. The company's EV/(EBITDA-CAPEX) is 3.4x with the industry average at 4.7x.
Appendix 1: Peers in Fixed Line Telecommunications
Below we provide Verizon Communications Inc benchmarking against other companies in Fixed Line Telecommunications industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Syqic ($SYQ) | 190.6% | 37.6% | 20.5% | 126.5% | |
| Alternative Networks ($AN.) | | -2.1% | -0.4% | 17.5% | 9.2% |
| Telecom Egypt ($TEEG) | -3.4% | 1.6% | 11.0% | 9.2% | |
| Rostelekom ($RKMD) | 7.4% | -0.2% | -1.6% | 2.8% | |
| BT Group ($BT.A) | | -5.9% | -4.2% | 1.0% | -1.7% |
| |
|---|
| Median (13 companies) | 0.6% | -2.1% | -4.1% | -1.6% | 5.8% |
|---|
| Verizon Communications Inc ($VZC) | | 4.5% | 4.1% | 5.4% | 3.6% |
Top companies by Gross margin, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Kt Corp ($KTCD) | 81.6% | 75.5% | 76.0% | 77.9% | |
| Telecom Egypt ($TEEG) | 45.0% | 41.4% | 41.9% | 44.2% | |
| Syqic ($SYQ) | 59.6% | 57.3% | 59.9% | 43.6% | |
| Alternative Networks ($AN.) | 38.1% | 39.0% | 39.2% | 41.2% | 41.3% |
| Adept Telecom ($ADT) | 35.9% | 32.2% | 34.5% | 36.4% | 37.6% |
| |
|---|
| Median (5 companies) | 45.0% | 41.4% | 41.9% | 43.6% | 39.5% |
|---|
| Verizon Communications Inc ($VZC) | 58.6% | 60.1% | 62.8% | 60.7% | 60.1% |
Top companies by EBITDA margin, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| O2 Czech Republic As ($O2CZ) | 41.6% | 39.1% | 38.6% | 41.0% | |
| Koninklijke Kpn Nv ($0O8F) | 39.5% | 35.9% | 34.1% | 39.1% | |
| Ooredoo Qsc ($ORDS) | 45.9% | 46.0% | 42.4% | 37.6% | |
| Hellenic Telecom.Organization S.A. ($OTES) | 33.0% | 32.0% | 28.8% | 35.4% | |
| Orange Polska Sa ($OPLD) | 39.2% | 34.3% | 30.1% | 33.2% | |
| |
|---|
| Median (13 companies) | 33.0% | 34.0% | 32.0% | 31.9% | 20.8% |
|---|
| Verizon Communications Inc ($VZC) | 26.5% | 25.6% | 40.3% | 28.4% | 37.3% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Ooredoo Qsc ($ORDS) | 20.7% | 21.9% | 27.5% | 25.3% | |
| Rostelekom ($RKMD) | 28.0% | 31.7% | 23.6% | 19.3% | |
| Telefonica Sa ($TDE) | 14.5% | 15.2% | 17.0% | 19.1% | |
| Orange Polska Sa ($OPLD) | 17.5% | 16.6% | 16.9% | 17.6% | |
| Hellenic Telecom.Organization S.A. ($OTES) | 14.2% | 11.7% | 14.8% | 15.4% | |
| |
|---|
| Median (13 companies) | 13.2% | 13.5% | 13.7% | 12.9% | 2.7% |
|---|
| Verizon Communications Inc ($VZC) | 14.7% | 14.0% | 13.8% | 13.5% | 13.5% |
Top companies by ROIC, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| BT Group ($BT.A) | 23.3% | 23.6% | 27.0% | 34.7% | 37.5% |
| Syqic ($SYQ) | 64.3% | 38.9% | 3.2% | 33.9% | |
| Alternative Networks ($AN.) | 36.7% | 35.2% | 33.7% | 28.5% | 20.2% |
| Adept Telecom ($ADT) | 11.9% | 11.6% | 15.5% | 13.2% | 14.3% |
| Hellenic Telecom.Organization S.A. ($OTES) | 4.8% | 8.2% | 5.4% | 10.4% | |
| |
|---|
| Median (13 companies) | 11.9% | 11.2% | 8.5% | 7.7% | 20.2% |
|---|
| Verizon Communications Inc ($VZC) | 7.8% | 8.0% | 16.7% | 10.1% | 19.3% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Telefonica Sa ($TDE) | 3.0x | 2.5x | 2.5x | 3.6x | |
| Kt Corp ($KTCD) | 2.0x | 2.1x | 2.1x | 3.1x | |
| Koninklijke Kpn Nv ($0O8F) | 2.4x | 3.8x | 3.4x | 3.0x | |
| Ooredoo Qsc ($ORDS) | 1.7x | 1.6x | 1.7x | 2.0x | |
| Rostelekom ($RKMD) | 1.3x | 1.7x | 1.8x | 1.8x | |
| |
|---|
| Median (13 companies) | 1.7x | 1.6x | 1.3x | 1.4x | 0.9x |
|---|
| Verizon Communications Inc ($VZC) | 1.4x | 1.7x | 0.8x | 2.8x | 2.1x |
