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Verizon Communications (VZ Free Verizon Stock Report), a telecommunications giant and Dow-30 component, reported 2018 fourth-quarter earnings of $1.12 a share, $0.06 above our estimate and a hefty 32% jump relative to the year-ago result, on a modest 1% year-over-year top-line improvement. Investors seemed rather underwhelmed by the company's recent performance, with the stock down modestly on the news.

As is typically the case, Verizon Wireless was the fair-haired boy during the final stanza of 2018, with the division reporting a 2.7% increase in fourth-quarter revenue, the fifth time the company has reported year-over-year wireless revenue growth in two years. Moreover, service revenues, which had been declining earlier in the year, grew 0.1% in the December quarter, thanks to the combined effects of ongoing customer growth, step-ups to unlimited plans, and the benefits of customers customizing their accounts through mix-and-match plans. In addition, VZ Wireless added 1.22 million retail postpaid net additions during the interim (compared to 1.17 million such connections this time last year), bringing Verizon Wireless' total number of retail connections to 118.0 million, up 1.5% year over year.

Separately, total revenues for the Wireline division's FiOS fiber-optic-based services were up 2.9% year over year, thanks to decent demand for high-quality broadband service. Truth be told though, the division added 54,000 FiOS Internet connections during the quarter, yet lost 46,000 FiOS Video connections, the result of the ongoing shift away from traditional linear video offerings.

In 2017, Verizon announced a goal of achieving $10 billion in total cash savings over the next four years. The initiative, which includes zero-based budgeting, had yielded approximately $2.3 billion of cumulative cash savings by year-end 2018, a majority of which has been derived from capital efficiencies. Management seems well on its way to meeting its goals, which would definitely augur well for the company's bottom line going forward. Indeed, we now look the company to post 2019 earnings of $4.85 a share, up a dime from our earlier call, on a low-single-digit top-line improvement. Much of this expected earnings improvement is attributable to the combined effects of a significant drop in the company's effective income tax rate (the result of tax reform) and improving margins, thanks to the above savings initiative.

All told, this blue chip stock remains a good choice for conservative investors, thanks to its impressive yield (almost twice that of the Value Line median), Highest (1) Safety rank, and worthwhile capital-appreciation potential three to five years hence.

About The Company:Verizon Communications was created by the merger of Bell Atlantic and GTE in June of 2000. It is a diversified telecom company with a network that covers a population of about 298 million and provides service to nearly 98.2 million. In the decade or so, it has acquired MCI (1/06), Alltel (1/09) and Yahoo! (6/17). The company is also the largest provider of print and on-line directory information. Has a wireline presence in 28 states & Washington, D.C. and a wireless presence in every U.S. state & D.C., as well as operations in 19 countries. 

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.