Verizon raises annual profit forecast over premium plans and tax reform

U.S. wireless carrier Verizon raised the lower end of its annual profit forecast, riding on strong demand for its premium plans and benefits from the Trump administration’s new tax law.

Shares of the company rose 3.5% on Monday as it also surpassed Wall Street estimates for June-quarter sales and profit, thanks to a 2.2% rise in wireless service revenue.

The telecom major has launched price-lock promotions and broadband-wireless bundles to retain users as competition intensifies from AT&T and T-Mobile, as well as broadband providers Comcast and Charter.

Verizon is also benefiting from favorable U.S. tax reform that allows companies to immediately write off the full cost of certain new equipment, finance chief Tony Skiadas said.

He estimated the legislation will boost free cash flow by $1.5 billion to $2 billion this year, prompting Verizon to raise its forecast for the metric to between $19.5 billion and $20.5 billion, up from $17.5 billion to $18.5 billion previously.

The company now expects 2025 adjusted profit to grow between 1% and 3%, compared with 0% to 3% previously.

Verizon pays the highest cash taxes among major U.S. telecoms, Wells Fargo analysts said earlier this month, adding the tax law will provide a big financial boost to the industry.

Shares of AT&T and T-Mobile were both up 2.3%.

However, Verizon posted a surprise drop of 9,000 monthly bill-paying wireless subscribers in the second quarter, reeling from user churn after price hikes in January. Analysts polled by FactSet were expecting an increase of 13,000 subscribers.

To drive growth, Verizon and its rivals have been bulking up on fiber-optic assets that can tap growing consumer data use.

Verizon in May won approval from the U.S. telecom regulator for its $20 billion acquisition of fiber-optic internet provider Frontier, after it agreed to end its diversity programs.

The sharper focus on internet services helped it posted 293,000 broadband net additions in the second quarter.

Overall, Verizon reported revenue of $34.5 billion, beating estimates of $33.74 billion, according to data compiled by LSEG. Its adjusted earnings per share of $1.22 also beat estimates.

—Harshita Mary Varghese, Reuters