Verizon Communications' adjusted earnings before interest, taxes, amortization and depreciation in 2024 and 2025 will be buoyed by the telecommunications giant's recent cost-saving initiatives, according to RBC Capital Markets in a client note emailed Monday. Earlier in September, Verizon stated in a regulatory filing with the Securities and Exchange Commission that it anticipates a severance charge of $1.7 billion to $1.9 billion in the third quarter, primarily due to a voluntary separation program for select US management employees.
This program, announced in June, aims to eliminate around 4,800 employees by the end of March 2025, with nearly half of these employees exiting the company this month. In the same filing, Verizon disclosed plans to cease the use of certain real estate assets and exit non-strategic businesses under its ongoing transformation strategy, which will result in rationalization charges estimated between $230 million and $380 million during the third quarter.
RBC noted that it now forecasts Verizon to report adjusted EBITDA of $48.93 billion for 2024, an increase from its previous estimate of $48.79 billion. The brokerage anticipates that the efficiencies gained from the voluntary separation program will become evident in the fourth quarter, with a more significant impact from cost savings projected for 2025.
Additionally, RBC expects Verizon's third quarter to include a sizable portion of adjustments related to per-share earnings, reflecting severance and business rationalization charges. The brokerage anticipates that the company's revenue for the third quarter will reach $33.46 billion, a slight decrease from its earlier forecast of $33.61 billion, while the consensus on Capital IQ stands at $33.71 billion.
RBC projects that the adjusted EBITDA will grow by 1.6% year-over-year in the quarter to $12.43 billion, compared to the prior estimate of $12.52 billion. According to RBC analysts led by Jonathan Atkin, "We expect EBITDA to benefit from low wireless churn and handset upgrades, slightly offset by elevated selling, general and administrative expenses stemming from rebranding efforts initiated at the end of the second quarter." The brokerage has also raised its price target on Verizon to $46 from $42, maintaining a sector perform rating on the stock.
Current Price: 44.41, Change: +0.08, Percent Change: +0.18.