Verizon Stock: Beat, RAISED Guidance, 6% Yield — Why We Say BUY While Wall Street Waits (VZ)

Verizon Communications (VZ) Q2 2026 — Verizon Communications (VZ) reported a strong Q2 2026: adjusted EPS of $1.30 beat the ~$1.27 estimate (+6.6% YoY) and management RAISED full-year guidance for the second straight quarter (adjusted EPS to $4.99-$5.04, free cash flow growth to 9-10%). Total revenue was $34.3B (-0.7% YoY as equipment fell ~20% on lower upgrades), but service revenue grew 3.5%, adjusted EBITDA hit a record $13.7B at a record 40.1% margin, and Verizon added 184,000 postpaid phone customers — its best Consumer Q2 in five years and a swing from a loss a year ago — with churn down to 0.92%. Q2 free cash flow jumped 24% to $6.4B, funding a ~6% dividend (about 19 straight years of raises, covered ~1.9x by FCF). The stock popped ~5% to ~$46, yet still trades at ~9x earnings and an ~11% free-cash-flow yield with $128.7B of net debt (2.5x). Our owner-earnings / DCF pegs fair value near $58 — about 25% above the price. Our call: BUY. Verizon is maybe the most unloved blue chip in America — a ~$192B wireless giant so out of favor it yields almost 6%, trades at ~9x earnings, and gets written off as a slowly melting ice cube. But Q2 2026 was the quarter the bears did not see coming: Verizon added 184,000 postpaid phone customers (its best Consumer Q2 in five years, versus a loss a year ago), churn fell to 0.92%, adjusted EBITDA hit a record $13.7B at a record 40.1% margin, free cash flow jumped 24% to $6.4B, and — for the second straight quarter — management RAISED full-year guidance (adjusted EPS to $4.99-$5.04, FCF growth to 9-10%, about $22B). New CEO Dan Schulman's transformation — simpler plans, a converged Verizon-One bundle, a loyalty program, and the newly closed Frontier fiber acquisition (~30M homes) — is showing up in the numbers. The ~6% dividend (about 19 straight years of raises) is covered ~1.9x by free cash flow. The catch: $128.7B of net debt (2.5x adjusted EBITDA, up after Frontier) and a still-flat top line. Even so, our conservative owner-earnings / FCF-DCF lands fair value near $58 — about 25% above the ~$46 price — and we are modestly ABOVE the Street's ~$50 average. Our call: BUY, 4/5. Not financial advice. THE CALL: BUY (4/5, CHEAP, HATED, AND FINALLY TURNING — A BEAT-AND-RAISE THE STREET DOESN'T BELIEVE YET) — base-case value ~$58 vs ~$46 today. KEY METRICS: - Adjusted EPS $1.30 beat ~$1.27 estimate (+6.6% YoY); GAAP EPS $0.92 (on ~$1.8B one-time charges) - Total revenue $34.3B (-0.7% YoY); service revenue +3.5%; wireless equipment revenue -20% - Postpaid phone net adds 184K — best Consumer Q2 in 5 years, vs a ~9K loss a year ago - Postpaid phone churn 0.92% (near record low); broadband net adds 348K (193K fixed wireless + 155K fiber) - Adjusted EBITDA $13.7B (+7.2%), a record; adjusted EBITDA margin 40.1%, a record - Q2 free cash flow $6.4B (+24.4%); first-half FCF $10.2B (+16%) - FY26 guidance RAISED (2nd straight quarter): adjusted EPS $4.99-$5.04, FCF growth 9-10% (~$22B) - Dividend $0.7075/qtr (~6% yield), ~19 straight years of increases, covered ~1.9x by FCF - Net unsecured debt $128.7B (2.5x adjusted EBITDA); Frontier fiber acquisition closed (~30M homes) - Buyback raised to up to $4.5B; $9.4B total capital returned to shareholders in first half - Valuation: ~9x forward earnings, ~11% FCF yield, ~6.5x EV/EBITDA; stock +5% on the print to ~$46 What to watch: two or three more quarters of low churn and positive postpaid phone net adds, plus visible debt paydown, would confirm the turnaround's durability and justify a re-rating toward the high $50s and beyond; the risk to respect is a renewed three-way price war with AT&T and T-Mobile that spikes churn and reverses the margin gains — so watch churn and net adds every quarter Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.