(Bloomberg) — Verizon Communications Inc. had its biggest drop in two years after cutting its full-year sales forecast as rapid inflation and rising gas prices coincided with a slowdown in store traffic.
The largest U.S. wireless carrier is also facing heated competition from AT&T Inc. and T-Mobile US Inc. That combined with a more anxious consumer caused Verizon to lower its projection for sales to be around flat this year, compared with a prior projection of 3% growth. Earnings are also now expected to be at the lower end of Verizon’s prior guidance.
“Look at the gas pump price and what’s happened there, it’s significantly different than what people saw at the start of the year,” Chief Financial Officer Matt Ellis said in an interview Friday. “And the overall rate of inflation now at 40-year highs, this wasn’t baked in to our planning assumptions.”
Ellis said it’s too early to know if the slowdown in store traffic is temporary. AT&T and T-Mobile have been chipping away at Verizon’s market share. In the first quarter, Verizon lost 36,000 phone customers. That was less than analysts expected, but the company has relied on costly phone giveaways and cash rewards. Strength in business customers led to a surprise gain in overall monthly wireless subscribers.
Verizon’s first-quarter earnings of $1.35 a share excluding some items matched the average analyst estimate, as did revenue of $33.6 billion. It’s the first time that the company hasn’t beaten earnings estimates since 2019.
Shares of the New York-based carrier fell as much as 5.9% Friday, their biggest intraday drop since March 2020. Verizon had been up almost 6% this year through Thursday’s close, trailing a 8.9% gain for AT&T and 14% increase for T-Mobile.
Verizon’s cautious tone is somewhat at odds with what investors heard this week from AT&T, which blew past estimates for wireless subscriber growth in the first quarter. While AT&T said it’s seeing some inflationary pressures, Chief Executive Officer John Stankey argued that consumers still willing to pay for high-quality connectivity.
T-Mobile, which reports results on April 27, is trying to extend its customer growth streak by capitalizing on its wide lead in 5G deployment.
(Updates with stock drop in first, sixth paragraphs.)
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