NEW YORK (AP) — Verizon Communications Inc., the nation's largest wireless carrier and second-largest telecommunications company, reports its fourth-quarter results before the stock market opens on Tuesday.
WHAT TO WATCH FOR: Verizon Wireless announced two weeks ago that it's going to start selling the iPhone of Feb. 10, ending years of speculation and AT&T Inc.'s exclusive hold on the device.
Fourth-quarter results will, of course, not reflect the addition of the iPhone, but executives will hold an analyst meeting in New York in conjunction with the release of the results, so investors could get an update on the company's expectations.
Analysts vary widely in their estimates of sales of Verizon iPhones this year, from 5 million to 13 million. They note that selling the popular device will likely reduce Verizon's earnings this year, because the company will be subsidizing each phone by about $400 and it takes time to make the money back through monthly service fees.
On Friday, Verizon Communications Inc. announced a change to its accounting practices, effectively moving $20.2 billion in losses from future earnings reports to the past. It's now recognizing losses and gains in its plans that fund pensions and other retirement benefits, like health care, in the same year that they occur rather than amortizing them over time, as has been standard practice. It's following the lead of AT&T, which instituted such a change a week earlier.
For the fourth quarter, this means that Verizon will post a $600 million charge to reflect the performance of its pension plans and changes in assumptions on returns and benefits.
The adjustment to past results means that Verizon lost $8.6 billion in 2008, rather than its originally reported net income of $6.4 billion, as the financial meltdown hammered the value of pension-plan assets like stocks. In general, the change will mean wider swings in net income in the fourth quarter every year, as the company books pension-related items.
WHY IT MATTERS: Verizon had 93.2 million wireless customers and 26.5 million landlines at the end of the last quarter. The stock is a component of the 30-stock blue-chip Dow Jones Industrial Average index.
WHAT'S EXPECTED: Verizon has forecast earnings that work out to 50 cents to 55 cents per share, excluding items. Analysts polled by FactSet expect Verizon to earn 55 cents per share, on revenue of $26.47 billion.
Verizon might provide an outlook for the current quarter. Analysts are expecting earnings of 52 cents per share on $26.67 billion in revenue.
Another closely-watched figure is the number of new wireless subscribers on contract-based plans. Michael Nelson of Mizuho Securities said he expects Verizon to report the addition of a net 650,000 subscribers.
LAST YEAR'S QUARTER: Verizon initially reported a loss of 23 cents per share for the fourth quarter of 2009, but adjusted that on Friday to a profit of 22 cents per share due to the change in its pension accounting practices. Revenue totaled $27.1 billion.
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