Verizon’s solid earnings results and robust capital spending (capex) bode well for continued spending among wireless technology providers, although some analysts expect spending to remain flatten out in the second half of the year.
The service provider on Tuesday reported better-than-expected revenue on Tuesday with a jump in wireless customers and a surge in tablet sales. The company reported growth of 53 percent in net wireless customers, to 1.4 million, for the second quarter, and a record 1.15 million in tablet sales.
Verizon’s capex for the second quarter totaled $4.3 billion, above consensus analyst forecasts of $4.1 billion. That’s an increase of 5% from the prior quarter and 8% year-over-year.
Raymond James analyst Simon Leopold said the capex forecast would be favorable for providers of wireless technology, including Alcatel-Lucent (ALU), Apple (AAPL), and Qualcomm (QCOM). However, Leopold does not expect a spending surge in the last half of the year, which may not be a positive for suppliers such as Juniper Networks (JNPR) and Ciena (CIEN).
“Despite the relatively solid start to the year, we remain cautious that spending trends for the remainder of the year will be unseasonal and linear rather than back-end loaded as is typical,” wrote Leopold in a research note.
Verizon reported operating revenue of $31.48 billion and net income was $4.3 billion, or $1.01 per share. Earnings were 78 cents a share in the same quarter of last year. Excluding special charges, the company earned 91 cents per share. Consensus estimates were for profits of 90 cents per share, according to Thomson Reuters.
It wasn’t all rosey for networking spending, unfortunately. Raymond James’ Leopold noted that the global service provider was cautious about enterprise technology spending.
“Management reiterated that enterprise will remain challenging for the foreseeable future, with the public sector continuing to drag on overall enterprise results,” wrote Leopold. “We look past the weakness in enterprise CPE, a business in which Verizon has less focus, but see slower strategic services revenue growth as a concern. Other variables and moving pieces lead us to remain cautious for an improved enterprise spending environment.”