It’s the American way. Business provides a product people want and is rewarded by the free market with profits. Sounds nice, right? But that’s not really what’s going on here. Thanks to the recent tax bill which cut the U.S. corporate tax rate to 25 percent, Verizon says it expects to get an extra $4 billion in cash flow next year. A number so high it even caught the most astute market observers off guard.
Verizon shares got an extra 79-cent boost on Monday when Scotiabank’s Jeff Fan said he thinks the U.S. wireless sector, and Verizon in particular, are underappreciated by the investment community, citing the tax cuts and favorable market conditions (*cough* net neutrality *cough*).
But even Fan only anticipated the tax cuts would mean $2 billion cash infusion for Verizon. When the company released the actual number in its quarterly earnings call Tuesday, it turned out to be almost double that number — between $3.5 and $4 billion, according to estimates.
Verizon did see a bump in subscriptions this year. But as CNBC notes even though sales were up, earnings for Verizon remained flat. But that was before the Trump administration came to D.C.
On the earnings call, the company reportedly teased there were plans to get rank-and-file employees in on the company’s windfall.
“Verizon will announce later today how employees will further share in the company’s success, and the company will also be increasing contributions to the Verizon Foundation by $200 million to $300 million over the next two years,” the company said in a statement according to CNBC. “These two initiatives have a projected EPS impact of 5 to 6 cents for each of the next two years.”
Rumors are also circulating Verizon could use the additional cash on hand to acquire its own media company, following in the footsteps of its competition. Verizon currently owns Oath, a content company which includes brands like AOL and Yahoo.
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