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As earnings ramp up, Verizon hits a bittersweet note on M&A speculation


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As earnings ramp up, Verizon hits a bittersweet note on M&A speculation

As the earnings season kicked into high gear across the media and communications industries, Verizon Communications Inc. hit a bittersweet note during the week that ended Jan. 27.

Early in the week, the telecommunications giant reported fourth-quarter 2016 net income attributable to the company of $4.50 billion, or $1.10 per share, but issued 2017 guidance below expectations. The company's share price took an immediate hit, down more than 4% on Jan. 24 alone.

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But renewed speculation that Verizon might purchase a cable operator seemed to help the stock later in the week. The Wall Street Journal reported Jan. 26 that Verizon CEO Lowell McAdam to met with executives close to Charter Communications Inc.

discuss a possible merger. Previously, industry analysts had discussed several possible candidates, including Comcast Corp. and DISH Network Corp., in addition to Charter. Still, some reacted skeptically to the report that Charter could be the preferred choice. Verizon's stock began to rebound, but it still ended trading Jan. 27 down nearly 6% for the week.

The M&A speculation appeared to cast a long shadow over several other companies during the week.

Charter, which is set to release earnings Feb. 16, saw a corresponding jump in share price, up nearly 5% for the week ended Jan. 27. DISH appeared to be a loser in the ongoing M&A speculation. Shares of the satellite TV operator slid lower on Jan. 26 but recovered somewhat the next day, with the stock price ending Jan. 27 down 1.4% for the week. AT&T acquire DISH competitor DIRECTV in 2015.

Also during the week, Yahoo! Inc. said Verizon's pending purchase of its operating businesses was pushed back to the second quarter.

Yahoo on Jan. 23 reported fourth-quarter 2016 net income attributable to the company of $162.0 million, or 17 cents per share, up from a net loss of $4.43 billion, or $4.70 per share, in the comparable 2015 period.

The Verizon-Yahoo deal may have also hit a snag as the SEC is in the the preliminary stage of an investigation into whether the company should have notified investors earlier about two massive data breaches in 2012 and 2013, the Journal reported Jan. 22. Executives did not address the investigation in the Jan. 23 earnings release and the company did not hold a conference call to discuss results.

Yahoo shares ended Jan. 27 up 5.6% for the week.

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The prospective policies of President Donald Trump were a frequent topic of discussion for companies as they reviewed their 2016 earnings and looked forward.

AT&T Inc. CEO Randall Stephenson said Jan. 25 that he felt a "degree of optimism" following a meeting with Trump. While Stephenson expressed confidence that the president could accomplish a reform of the corporate tax rate in 2017, he didn't discuss the president's reaction to the pending deal between AT&T and Time Warner Inc., which Trump opposed as a candidate.

AT&T reported fourth-quarter 2016 net income attributable to the company of $2.4 billion, or 39 cents per share, compared to $4.0 billion, or 65 cents per share, in the prior-year period. The company's shares dipped slightly around the earning release but ended the week up 1.4%.

Comcast Corp. also reported positive fourth quarter 2016 results, with cable revenues growing 7.1% year over year. Company executives said Jan. 26 that Comcast would take a "disciplined" approach to a planned wireless offered set to launch in 2017. Shares of the cable giant ended the week up 3.2%.

Sprint Corp. also saw a share price bump after the company announced its acquisition of a 33% stake in the Jay-Z owned music-streaming service Tidal. The shares ended up 3.3% at the close Jan. 27.

Turning to new media, Microsoft Corp. and Alphabet Inc. both saw share price jumps near the end of the week after reporting earnings Jan. 26. Microsoft cited strong growth in its cloud business as it reported net income in the fiscal second quarter 2016 of $5.20 billion, or 66 cents per share, compared to $5.02 billion, or 62 cents per share in the prior-year period. Microsoft's stock ended Jan. 27 up near 5% for the week.

Alphabet's growth was more modest, with the company reporting top-line revenue growth of 22% across all of its businesses in the fourth quarter of 2016, though it reported an operating loss in its "moonshot" Other Bets segment. CEO Sundar Pichai described other areas, such as Google Voice search, as a work in progress. The company's shares locked in a gain of about 2% for the week.

EBay Inc. also saw a bump of more than 6% for the week as it reported earnings that reflecting strong holiday sales.