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For Verizon Corporation: Review stock market performance and

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For Verizon Corporation:
Review stock market performance and debt ratings of our company. Comment on how well or poorly the market information relates to your findings in previous weeks. Are the stock and debt of your company priced appropriately for the company’s risk and earnings expectations? Which would you purchase as an investor? Explain why or why not?
Find one or more recent press releases about your company. Do any of them address financial issues? Does the press coverage seem consistent with your research?
Find one or more financial analyst reports about your company. Do they identify any financial issues you’ve overlooked? (Remember to keep your focus on financial factors.)
Post a message to the Forum explaining one of your key findings related to Market Data.
The recent decline in VZ stock is due to the sale of landlines to Frontier Communications. FTR bought the lines in a stock deal and the deal closed at the beginning of July. All VZ holders got a FTR stock dividend at the rate of @ 1 share of FTR for each 4.165977 shares of VZ. So if you held VZ the stock it depreciated in line with the FTR stock distribution. The good news is you got the FTR stock distribution as a VZ holder and FTR pays a pretty healthy dividend @ 11%.

The bond ratings are

Moody's S&P Fitch
Verizon Communications A3 A A
Verizon Communications - CP P-2 A-1 F-1
Verizon Wireless A2 A A

VZ's bond ratings came under scrutiny after the Alltel acquisition, As Verizon absorbed a significant amount of debt. The following is from the VZ web sight...

In May 2009, Standard and Poor's affirmed Verizon Communication’s 'A' corporate credit and 'A-1' short-term ratings with negative outlook and S&P placed the ratings of Verizon North and West Virginia on watch negative in consideration of the divestiture announcement. In January 2009, S&P affirmed the 'A' corporate credit and 'A-1' short-term ratings on Verizon Wireless.

In October 2009, Moody's affirmed Verizon Communication’s 'A3' long-term debt and “P-2” short-term ratings and changed the outlook to stable. The affirmation included the ratings of Verizon Wireless (‘A2’) and most wireline subsidiaries. In May 2009, Moody's placed the ratings of Verizon North, Northwest and West Virginia on review for possible downgrade in consideration of the divestiture announcement. In November 2008, Moody's initiated a Verizon Wireless long-term debt rating at 'A2'.

In May 2009, Fitch affirmed Verizon Communication's IDR at 'A' and placed Verizon North, North West and West Virginia on watch negative in consideration of the divestiture announcement. In November 2008, Fitch downgraded the long-term debt rating of Verizon Communications and subsidiaries to 'A' from 'A+' and changed the outlook to 'stable'. In the same month, Fitch initiated a Verizon Wireless long-term debt rating at 'A' and outlook 'stable'

I think that the debt is priced appropriately given it's current yield, I also think the stock is undervalued based solely on the dividend discount theory. The stock yields @ 6.5%..., but again trades at a discount due to the significant debt load.

I would buy the stock for potential appreciation due to success in wireless and FiOS services. In addition it is one of the best dividend payers out there.

As an Aside AT&T has a similar yield. People are obviously questioning the long term growth strategy of the phone companies..

Here is a link to some press releases×tamp=20100701141200

The second press release deals with the financial issues surrounding the sale of landlines to Frontier.

The press coverage seems consistent with the research in that this is a very large corporation that practices full disclosure so it is very rare to have information mis priced. However, there were recent rumors about VZ potentially cutting the dividend this showed up on some blogs as well as on some of the independent musings on the stock.

Here is a link to a analyst report from seeking alpha (this is a great source of info FYI)

By the numbers:

Verizon added 1.4 million net wireless customers in the second quarter. That sum includes 665,000 retail postpaid subscribers.
Retail postpaid churn was 0.94 percent in the quarter. Retail churn was 1.33 percent and total churn was 1.27 percent.
Verizon ended the second quarter with 86.2 million retail customers and 92.1 million total.
Wireless data revenue was $4.7 billion, up 23.4 percent from a year ago.

Once the Q came out the stock has rallied nicely (also aided by the market)

One of the key findings has to be the fact that after the Q was reported it looks like the dividend is still safe at these levels base on strong subscriber growth, low churn and wireless data revenue up nicely! Also they will be getting the i phone soon which could also help subscriber growth and data revs...
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