Verizon Q2 Headline Results Broadly In-Line; Credit Spreads Muted

Rating: Baa1/BBB+/A-

• •Steady set of results with headlines operating revenue and EBITDA broadly in-line. Credit metrics stable with CapEx looks lower than expected while FCF saw a slight improvement. Doesn’t look like much of a spread mover though headlines imply the equity has sold-off pre-market despite in-line EPS.
  
  
• •Q2 operating revenue +0.6% YoY (-0.8% vs. BBG consensus) with strength in service revenues (+1.8% YoY, over four-fifths of total op revenue) offset slightly by equipment revenues -5.3%. EBITDA was +2.8% YoY (+0.1% vs. consensus).
• •Operating metrics look strong; retail postpaid phone additions +9.3% YoY, broadband subscribers +17.2%
• •Credit metrics look steady; H1 CapEx of USD 8.1bn is down from USD 10.1bn in H123 which taken with Q1 results implies Q2 CapEx of USD 3.7bn which looks low vs. BBG cosnesnus. Q1 FCF of USD 5.8bn was up from USD 5.6bn in Q123.
• •Net leverage of 2.5x was down from 2.6x at Q1.