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Through 600-point Sell Off, Verizon Falls Just .44%

We saw most of the stock market sell off on Friday following the U.K.’s historic exit from the European Union. However, there were some stocks that managed to hold their own with one of those being Verizon (NYSE: VZ).

One of the reasons the company was able to stay in the green could be attributed to a key acquisition it made last week.

I consider Verizon to be a mixed bag of tricks. It’s fresh off of a strike that lasted almost two months, which is expected to have negatively affected its second quarter earnings. It reports those earnings next month.

Last week, it announced the acquisition of a company that develops location-based software to manage mobile resources.

While Verizon weathered the Friday’s deep declines, at this point, I would steer clear in buying Verizon as a long-term play. However, there is a good amount of interests in the options market for calls and puts that expire just before it reports earnings next month, and they may be the way to go as investment plays.

While most stocks opened down, Verizon opened at $54.31 and moved up to $55.22 before pulling back. It closed Friday down .40%. The stock is up just over 18% year-to-date.

 · IoT investment

Verizon acquired a company that develops location-based software to manage mobile resources. Called Telogis, the company sells software-as-a-service (SaaS), which incorporate location information into applications for vehicles, as well as geospatial software development toolkits.

Verizon is specifically seeking to position itself in the connected vehicle and mobile enterprise management sectors. In addition to Telogis’ enterprise product portfolio, Verizon was attracted to the software company because of its partnerships with some of the world’s leading vehicle and equipment manufacturers.

Telogis brings its software platform and new distribution relationships to Verizon
Telematics’ suite of connected vehicle solutions for consumers and enterprise customers.

 · Strike of the year

Verizon’s wireline employees went on strike beginning on April 13. It lasted through June 1, and during that time the company experienced all kinds of problems.

The sheer magnitude, in terms of the numbers of workers who walked off the job and left the company’s Fios unit unmanned, will have a long-term effect of the company. While the company was able to maintain the Fios unit while it negotiated new contracts with the workers, there is still concern over when the company will fully rebound from the strike.

Referred to as the wireline workers, roughly 40,000 of them went on strike, including network technicians and customer service representatives. Fios consists of Internet, telephone and television services.

As a result of the strike, Verizon had to incur several additional costs. For example, it had to shift costs that had been associated with acquiring new customers and new installations to keep existing customers who needed regular maintenance and repairs. It also saw its costs increase related to hiring contractors to replace the striking workers; and it had to pay overtime to management employees.

Verizon’s CFO Fran Shammo has said that earnings per share during the second quarter were expected to be lessened by between $.05 and $.07. As of June 16, its EPS was $.96. Shammo added that the company’s earnings “will flow to the end of the year.”

Shammo recently spoke at a conference hosted by Bank of America Merrill Lynch. He opened up to the group and also spoke about how the strike, which was the first time he had done so since the end of the strike. He admitted that he was unable to pinpoint the numbers, such as how many installations it has in the works.

 · Call and put activity

Verizon is due to release its second quarter earnings report on July 26. There was a considerable amount of interest on Friday for the call and put contracts that expire on July 15.

The contracts with the most open interest were as follows:
The 52.50 call had an open interest of roughly 44,000
The 55 call had an open interest of roughly 29,000
The 45 put had an open interest of roughly 66,000
The 50 put had an open interest of roughly 55,000

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