Earnings insights for October 22: Verizon, Philip Morris & General Electric

Earnings insights for October 22:  Verizon, Philip Morris & General Electric

As we approach October 22, the financial world is focused on the upcoming earnings releases for Verizon Communications, Philip Morris International, and General Electric Vernova. Below is a detailed overview of each company's expectations and key factors influencing their respective earnings reports.

Verizon Communications (VZ)

Verizon is expected to announce its third-quarter 2024 earnings on October 22. The consensus estimates peg the company’s sales at $33.63 billion, with an expected earnings per share (EPS) of $1.18. Verizon has historically surpassed earnings expectations, delivering a four-quarter earnings surprise of 2.19% on average, with a 0.88% surprise in the last reported quarter.

Key Factors Shaping Verizon's Q3 Performance:

1. 5G Growth and Bundling Strategies: Verizon has continued its aggressive push in the 5G space, offering mix-and-match pricing on both wireless and home broadband plans. These initiatives are expected to drive higher 5G device adoption and an increase in premium unlimited plans.
2. Strategic Partnerships: During the quarter, Verizon expanded its satellite-based direct-to-device messaging service through a partnership with Skylo Technologies. Additionally, Verizon’s collaboration with SK Shieldus to provide cybersecurity solutions in Asia, along with the rollout of 5G in teleoperated electric vehicles, is likely to boost Business segment revenues.
3. Capital Expenditures: Verizon has continued to invest heavily in its 5G Ultra-Wideband network and fiber infrastructure, with capex expected to impact financial results.

From a valuation perspective, Verizon remains attractive with a P/E ratio of 9.37, which is below the industry average of 12.46. Despite underperforming its peers like AT&T and T-Mobile in terms of stock growth (up 41.3% compared to the industry’s 50.2%), Verizon’s steady investment in 5G and its competitive pricing strategy are likely to generate solid returns in the long run.

Philip Morris International (PM)

Philip Morris International has seen its stock rise over 27% year-to-date, despite a recent downturn in performance. Investors are looking forward to the third-quarter 2024 report, with consensus EPS at $1.83, up from $1.67 in the same quarter last year, reflecting a 9.6% increase. Analysts expect revenues of $9.57 billion, which represents a 4.7% year-over-year increase.

Key Factors Driving Growth:

1. Shift to Smoke-Free Products: Philip Morris has made significant progress in its transition towards reduced-risk, smoke-free products, which accounted for 38.1% of net revenues in the second quarter of 2024. The company’s flagship IQOS product continues to perform well, driven by increased demand for inhalable smoke-free alternatives.
2. Nicotine Pouches: The growing popularity of nicotine pouches, particularly the ZYN product, is expected to further boost the company’s smoke-free product segment. This development is helping PM attract investors concerned about the long-term sustainability of traditional tobacco products.

Despite the stock’s strong performance, PM's forward P/E ratio of 17.7 remains significantly below the S&P 500’s P/E ratio of 23, making it appear undervalued in the consumer goods sector.

General Electric Vernova (GEV)

Since its spinoff from General Electric in April, GE Vernova has been positioned as a key player in the energy sector, specifically targeting renewable energy and electrification markets. Analysts expect GE Vernova to report $8.92 billion in revenue for Q3, up from $8.13 billion during the same period last year, when it was still part of the GE conglomerate.

Key Growth Drivers:

1. Renewable Energy Focus: GE Vernova’s core business revolves around renewable energy solutions, particularly in wind and gas power. The company has an installed base of 55,000 wind turbines generating over 100 gigawatts of energy globally. However, the offshore wind segment has faced challenges, with high costs and a recent issue involving a broken offshore blade.
2. Electrification Growth: GE Vernova’s electrification segment is one of its fastest-growing verticals, benefiting from customers investing in grid modernization and new energy sources. Orders for electrification solutions more than doubled in North America in the second quarter, and the backlog has grown by 25% since the beginning of 2024.
3. AI Demand: Analysts have highlighted the company’s ability to tap into the growing demand for AI-powered data centers, which require vast amounts of energy. With its renewable energy solutions, GE Vernova is well-positioned to benefit from this trend.

Despite the expected loss in the offshore wind segment for Q3, GE Vernova's electrification and gas power segments are expected to drive overall profitability. Analysts are optimistic about the company’s ability to achieve modest profitability in the wind segment by Q4, signaling improved performance moving forward.

Conclusion

As earnings reports for Verizon, Philip Morris, and GE Vernova are set to be released on October 22, investors are eagerly awaiting insights into these companies' financial health and strategic progress. Verizon continues to invest in its 5G network and innovative services, Philip Morris is driving growth through its smoke-free products, and GE Vernova is capitalizing on the global shift towards renewable energy.

Each company faces unique challenges and opportunities, but all are expected to deliver solid earnings reports that could provide further clarity on their future performance. Investors should watch for any surprises in these reports, as they could set the tone for market sentiment in their respective sectors.

Written By Philip Papageorgiou

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