Verizon Communications Inc (VZ) Extended Graph Analysis

October 24th, 2019 Posted by Extended Analysis No Comment yet

About the Company

verizon

Verizon Communications Inc is a telecommunication company operating globally and founded in October 7, 1983 and incorporated in Delaware. USA.The company is headquartered in New York, New York.

Verizon Communications was created by Bell Atlantic Corp. and GTE Corp. The company provides wireless voice and data services through its wireless segments, internet access on different devices.

Verizon Communications Inc (VZ) Extended Graph Analysis

1) VZ CASH FLOWS

VZ CASH FLOWS

2014 2015 2016 2017 2018 2019
Net cash provided by operating activities 30,631,000,000 38,930,000,000 22,715,000,000 25,305,000,000 34,339,000,000 33,742,000,000
Net cash used for investing activities -15,856,000,000 -30,043,000,000 -10,983,000,000 -19,372,000,000 -17,934,000,000 -17,795,000,000
Net cash provided by (used for) financing activities -57,705,000,000 -15,015,000,000 -13,322,000,000 -6,734,000,000 -15,377,000,000 -15,555,000,000
Capital expenditure -17,545,000,000 -27,717,000,000 -17,593,000,000 -17,830,000,000 -18,087,000,000 -17,260,000,000
Free cash flow 13,086,000,000 11,213,000,000 5,122,000,000 7,475,000,000 16,252,000,000 16,482,000,000

Facts:

  • The net cash provided by operating activities was $33.742 billion in 2019 trailing twelve months.
  • Net cash used for investing activities was -$17.795 billion in 2019 trailing twelve months.
  • Net cash provided by (used for) financing activities was -$15.555 billion in 2019 trailing twelve months.
  • The capital expenditure was -$17.260 billion in 2019 trailing twelve months.
  • Free cash flow was $16.482 billion in 2019 trailing twelve months.

Explanation:

  • Net cash provided by operating activities was erratic in movement, howbeit, it maintained an average of $31 billion in the last five years. The growth was 10 percent.
  • Cash used for investing activities is comprised of investment in property, plant and equipment, which represent 97 percent of the total. It also consists of acquisitions and purchases of intangibles. 
  • Net cash provided by (used for) financing activities represents debt repayment in significant amount, and payment of dividend at 64 percent of the total.
  • Capital expenditure represents investment in property, plant and equipment.
  • Free cash flow was positive in the last five years and it has grown 26 percent.

Interpretation

The company has managed to provide cash for the daily operation of the business, however further analysis should be done whether the cash was enough for its daily operation.

2. VZ BALANCE SHEET

VZ BALANCE SHEET

2014 2015 2016 2017 2018 2019
Total cash 11,153,000,000 4,820,000,000 2,880,000,000 2,079,000,000 2,745,000,000 2,745,000,000
Total current assets 29,623,000,000 22,280,000,000 26,395,000,000 29,913,000,000 34,636,000,000 34,636,000,000
Net property, plant and equipment 89,947,000,000 83,541,000,000 84,751,000,000 88,568,000,000 89,286,000,000 89,286,000,000
Total non-current assets 203,085,000,000 222,360,000,000 217,785,000,000 227,230,000,000 230,193,000,000 230,193,000,000
Total assets 232,708,000,000 244,640,000,000 244,180,000,000 257,143,000,000 264,929,000,000 264,929,000,000
Short-term debt 2,735,000,000 6,489,000,000 2,645,000,000 3,453,000,000 7,190,000,000 7,190,000,000
Total current liabilities 28,064,000,000 35,052,000,000 30,340,000,000 33,037,000,000 37,930,000,000 37,930,000,000
Long-term debt 110,536,000,000 103,705,000,000 105,433,000,000 113,642,000,000 105,873,000,000 105,873,000,000
Total liabilities 220,410,000,000 228,212,000,000 221,656,000,000 214,047,000,000 211,684,000,000 211,684,000,000
Total stockholders’ equity 12,298,000,000 16,428,000,000 22,524,000,000 43,096,000,000 53,145,000,000 53,145,000,000

 

Facts:

  • Total cash was $2.7 billion in 2018.
  • Current assets was $34.636 billion in 2018.
  • Net property, plant and equipment was was $89 billion in 2018.
  • Non-current assets was $230 billion in 2018.
  • Total assets was $264.9 billion in 2018.
  • Short-term debt was $7.1 billion in 2018.
  • Current liabilities was $37.93 billion in 2018
  • Long-term debt was $105.873 billion in 2018.
  • Total liabilities was $211.684 billion in 2018.
  • Stockholders equity was $3.1 billion in 2018.

Explanation:

  • Total cash represents one percent of the total assets in 2018.
  • Current assets represents 13 percent of the total assets and has a growth of 17 percent in five years.
  • Net property, plant and equipment represents 34 percent of the total assets, PPE was stable in the last five years.
  • Non-current assets represents 87 percent of the total assets. Intangible assets and PPE has a significant amount.
  • Total assets has grown 14 percent in five years.
  • Short-term debt represents 19 percent of the total current liabilities and 3 percent of the total liabilities in 2018.
  • Total current liabilities represents 18 percent of the total liabilities.
  • Long-term debt represents 50 percent of the total liabilities.
  • Non-current assets represents 82 percent of the total liabilities. Long-term debt has a significant amount.
  • Total liabilities represents 80 percent of the total liabilities and stockholders equity.
  • Stockholders equity represents 20 percent of the total liabilities and stockholders equity and has a growth of 332 percent in five years.

Interpretation

Balance sheet shows that current assets is lesser than the current liabilities by 9 percent in 2018. In other words, the company’s current assets is not enough to meet its current liabilities on time when due date comes. 

3. VZ FINANCIAL RATIOS

VZ FINANCIAL RATIOS

2014 2015 2016 2017 2018 2019
Asset Turnover (avg) 0.50 0.55 0.52 0.50 0.50 0.48
Return on Asset (ROA) % 3.80 7.49 5.37 12.01 5.95 5.80
Return on Equity (ROE) % 37.65 124.48 67.40 91.74 32.27 29.17
Financial Leverage (avg) 18.92 14.89 10.84 5.97 4.98 5.00
Return on Invested Capital % 10.38 16.66 12.38 22.62 11.89 10.99
Interest Coverage 4.11 6.74 5.80 5.35 5.06 5.17

Facts:

  • The asset turnover was averaging 0.48 in 2019 trailing twelve months.
  • Return on assets was 5.80 percent in 2019 trailing twelve months.
  • Return on equity was 29.17 percent in 2019 trailing twelve months.
  • Financial leverage was averaging 5.00 in 2019 trailing twelve months.
  • Return on invested capital was 10.99 percent in 2019 trailing twelve months
  • The interest coverage was 5.17 in 2019 trailing twelve months

Explanation

  • Asset turnover indicate that for every dollar in assets, VZ generates 48 cents, which is not very efficient.
  • Return on assets indicate that the company generates 5.8 cents of net income for every dollar invested in assets. 
  • Return on equity indicates that VZ generated 29 cents in profit for every dollar invested in common stock. 
  • Financial leverage of 5.0 means that for every dollar in equity VZ had 5 in total assets. The company is running at risk at rate 5.0.
  • Return on invested capital indicates that VZ generated 11 cents for every dollar invested in capital.
  • Interest coverage indicates that the company can make 5.17 times more earnings than VZ’s current interest payment.  

Interpretation

The asset turnover ratio shows that the company was not very efficient in generating sales from its assets. Moreover, the financial leverage means that the company is at risk at the rate of 5.0, the company uses more debt in its capital structure.

4. VZ INCOME AND MARKET

VZ INCOME AND MARKET

2014 2015 2016 2017 2018 2019
Sales 127,079,000,000 131,620,000,000 125,980,000,000 126,034,000,000 130,863,000,000 131,087,000,000
EBIT 19,599,000,000 33,060,000,000 27,059,000,000 29,188,000,000 26,869,000,000 28,462,000,000
Net Income 9,625,000,000 17,879,000,000 13,127,000,000 30,101,000,000 15,528,000,000 15,839,000,000
Market Capitalization 194,369,000,000 188,262,000,000 217,611,000,000 215,925,000,000 232,303,000,000 246,491,000,000
Intrinsic Value 466,577,266,413 937,481,255,842 671,490,240,559 369,451,760,183 434,344,652,563 786,489,079,285

Facts:

  • Sales was $131 billion in 2019 trailing twelve months.
  • EBIT was $28.462 billion in 2019 trailing twelve months.
  • Net income was $15.839 billion in 2019 trailing twelve months.
  • Market capitalization was $246.491 billion in 2019 trailing twelve months.
  • Intrinsic value was $786.489 in 2019 trailing twelve months.

Explanation

  • The sales growth was 3 percent in the last five years. 
  • Sales was stable averaging $129 billion.
  • EBIT has grown 45 percent in the last five years and stable.
  • Net income has a growth of 65 percent in the last five years.
  • Net income represents 12 percent of total sales.
  • Market capitalization was erratic in movement in the last five years, and has grown 27 percent.
  • Intrinsic value has a growth of 68 percent.

Interpretation

VZ has not experienced negative bottomline in the last five years. In 2017 net income soared 129 percent from the previous year due to significant amount in provision for income tax. 

5. VZ TOTAL EXECUTIVE COMPENSATION

VZ TOTAL EXECUTIVE COMPENSATION

2014 2015 2016 2017 2018
44,450,000 47,770,000 47,540,000 60,470,000 102,859,957

Facts:

  • In 2014, the total executive compensation was $44.45 million.
  • In 2015, the total executive compensation was $47.77 million.
  • The total executive compensation in 2016 was $47.54 million.
  • The total executive compensation in 2017 was $60.47 million.
  • Total executive compensation in 2018 was $102.860 million.

Explanation

  • Lobbying in 2014 was 0.46 percent of the net income.
  • Lobbying expenses in 2015 was 0.27 percent of the net income.
  • While in 2016, lobbying was 0.36 percent of the net income.
  • In 2017 lobbying expenses was 0.20 percent of the net income.
  • Expenses in lobbying in 2018 represents 0.66 percent of the net income.

Interpretation

The lobbying expenses from 2014 to 2018 was less than one percent of the net income which is a very minimal amount of expenditure in lobbying.

5.a. VZ KEY EXECUTIVE COMPENSATION

VZ KEY EXECUTIVE COMPENSATION

2014 2015 2016 2017 2018
Total Key Executive Compensation 24,650,667 24,400,970 33,585,716 53,211,627 102,859,957
Hans Enk Vestberg, Chairman and CEO 0 0 0 9,817,419 22,206,086
Lowell C. Macadam, Former Chairman and CEO Former 18,306,509 18,343,660 17,937,581 17,937,581 18,637,867
Kumara Guru Gowrappan, EVP and CEO, Verizon Media Group 0 0 0 0 12,752,938
Timothy M. Armstrong, Former EVP, President and CEO – Oath 0 0 0 0 12,488,942
Matthew D. Ellis, EVP and CFO 0 0 2,697,359 5,649,368 7,060,676
John G. Straton, Former EVP and President, Global Operations 6,344,158 7,057,310 7,040,609 13,540,151 15,646,852
Marc C. Reed, EVP and Chief Administrative Officer 0 0 6,173,169 6,267,108 7,352,470
Ronan Dunnel, EVP and President, Verizon Consumer Group 0 0 0 0 6,714,126

Facts:

  • Total key executive compensation in 2018 was $103 million.
  • Chairman and CEO, Hans Erik Vestberg total compensation was $22,206,086 in 2018.
  • Former Chairman and CEO former, Lowell C. Macadam total compensation in 2018 was $18,637,867.
  • EVP and CEO. Verizon Media Group, Kumara Guru Gowrappan compensation in 2018 was $12,752,938.
  • Former EVP, President and CEO – Oath Timothy M. Armstrong total compensation was $12,488,942.
  • EVP and CFO Matthew D. Ellis total compensation was $7,060,676.
  • Former EVP and President, Global Operations John G. Straton total compensation was $15,646,852.
  • EVP and Chief Administrative Officer Marc C. Reed total compensation was $7,352,470.
  • EVP and President, Verizon Consumer Group Ronan Dunnel total compensation was $6,714,126.

Explanation

  • Total key executive compensation in 2018 was categorized into:
    • Salary $8,414,698
    • Bonus $2,999,998
    • Restricted stock award $61,046,184
    • Non-equity compensation $15,657,375
    • Other compensation $14,741,702
  • Hans Erik Vestberg total compensation represent 22 percent of the total key executive compensation in 2018.
  • Lowell C. Mcadam total compensation represent 18 percent of the total key executive compensation in 2018.
  • Kumara Guru Gowrappan total compensation represents 12.40 percent of the total key executive compensation in 2018.
  • Timothy M. Armstrong total compensation represents 12.14 percent of the total key executive compensation in 2018.
  • Matthew D. Ellis total compensation represents 7 percent of the total key executive compensation in 2018.
  • John G. Straton total compensation was 15 percent of the total key executive compensation in 2018.
  • Marc C. Reed total compensation represent 7 percent of the total key executive compensation in 2018.
  • Ronan Dunnel total compensation represents 6.5 percent of the total key executive compensation in 2018.

Interpretation

The total key executive compensation represents 0.66 percent or less one percent of the net income for 2018.

6. VZ LOBBYING

VERIZON LOBBYING

ANNUAL LOBBYING
1998 21,260,000 2009 17,680,000
1999 5,320,000 2010 16,850,000
2000 10,480,000 2011 15,690,000
2001 8,200,000 2012 15,020,000
2002 8,060,000 2013 13,510,000
2003 9,100,000 2014 12,900,000
2004 9,080,000 2015 11,430,000
2005 11,770,000 2016 10,080,000
2006 13,210,000 2017 12,230,000
2007 12,560,000 2018 12,060,000
2008 17,910,000 2019 5,008,000

Facts:

  • Annual lobbying in 1998 was $21,260,000.
  • Annual lobbying in 1999 was $5,320,000.
  • In the year 2000, annual lobbying was $10,480,000
  • In 2001, the annual lobbying was $8,200,000.
  • The 2002 annual lobbying was $8,060,000.
  • The 2003 annual lobbying was $9.1 million.
  • 2004 annual lobbying was $9.08 million.
  • 2005 annual lobbying was $11,770,000.
  • 2006 annual lobbying was $13,210,000.
  • 2007 annual lobbying was $12,560,000.
  • 2008 annual lobbying was $17,910,000.
  • 2009 annual lobbying was $17,680,000.
  • 2010 annual lobbying was $16,850,000.
  • 2011 annual lobbying was $15,690,000.
  • 2012 annual lobbying was $15,020,000.
  • 2013 annual lobbying was $13,510,000.
  • 2014 annual lobbying was $12,900,000.
  • 2015 annual lobbying was $11,430,000.
  • 2016 annual lobbying was $10,080,000.
  • 2017 annual lobbying was $12,230,000.
  • 2018 annual lobbying was $12,060,000
  • 2019 lobbying was $5,008,000.

Explanation:

The company is spending a yearly lobbying from 1998 to 2019.  A note from OpenSecret state that, all lobbying expenses report came from the Senate Office of Public Records. The data for the most recent years was downloaded on September 19, 2019.

6.a. VZ LOBBYING BY INDUSTRY

VZ LOBBYING BY INDUSTRY

Industry Total
Telephone Utilities 4,164,817
Internet 843,183
Total 5,008,000

Facts:

  • Total amount lobbied on telephone utility industries was $4,164,817 in 2018.
  • Total amount lobbied on Internet industries was $843,183 in 2018.

Explanation

  • Lobbied amount on telephone utility industries represents 83 percent of the total amount lobbied in 2018.
  • Lobbied amount on internet industries represents 17 percent of the total amount lobbied in 2018.

7. VZ FINANCIAL STRENGTH

VZ FINANCIAL STRENGTH

DATA:

Working capital $131,087,000,000
Total assets $264,829,000,000
Sales $131,087,000,000
EBIT $28,462,000,000
Market value of equity $253,909,000,000
Book value of total liabilities $211,684,000,000
Retained earnings $43,542,000,000

CALCULATION

 

Ratio Score Result
A – Working Capital / Total Assets 0.49 1.20 0.59
B – Retained Earnings / Total Assets 0.16 1.40 0.23
C – EBIT / Total Assets 0.11 3.30 0.35
D – Market Value of Equity / Book Value of Total Liabilities 1.20 0.60 0.72
E – Sales / Total Assets 0.49 1.0 0.49
Z-Score 2.39

 

Formula: Z-Score = 1.2A + 1.4B + 3.3C + 0.6D + 1.0E
Explanation:

Z-Score is a statistical measurement that compare data points from different sets of data to find correlations. This measurement by Dr. Edward Altman is a significant measure in determining the financial strength of the company because it relies on different weighted financial liquidity and profitability metrics to come up with the overall score. This measure indicates the probability of bankruptcy.

Interpretation

The calculated Z-Score for Verizon Communications Inc was 2.39. According to Dr. Edward Altman that a grading scale of 1.8 to 3 indicates that the company will likely declare bankruptcy. 

Let us go back to the balance sheet analysis, it shows that current liabilities is greater than the current assets which indicates that the company’s current resources were not enough to meet its current obligations on time even all receivables are collected and inventories have been monetized. Financial leverage above also indicates that the company is at risk at the ratio of 5.0.

Hence, this measurement categorized the profitability or return on investment, liquidity, leverage and the efficiency in operating.

 

CITATION

https://www.sec.gov/cgi-bin/browse-edgar?CIK=VZ&owner=exclude&action=getcompany

https://www.verizon.com/about/

https://www.opensecrets.org/lobby/clientsum.php?id=D000000079&year=2019

Researched and written by Criselda

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