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Mini Equity Research Report [WLO: 4] [CLOs: 1, 2, 3, 4]

Many investment banks employ analysts to write equity research reports on public companies to advise their clients on their stock investments. In many cases, an initial equity research report is 20 to 50 pages long! For this class, you will focus on only three of the many important sections typically included in an equity research report. Thankfully, your Mini Equity Research Report will be much shorter than those published by investment banks!

In Week 1, you chose a publicly traded company to use throughout this class for the Mini Equity Research Report. In the first section of the Mini Equity Research Report, you evaluate the historical financial performance of the company (Week 1). In the second section of the Mini Equity Research Report, you evaluate the company’s performance using common financial ratios, and you compare the company to the competitor’s performance with the same financial ratios (Week 2). Finally, in Sections 3 and 4 of the report, you develop a value for the company’s stock and compare your value to the current market price of the stock (Weeks 3 and 4). Based on the analysis you present in these four sections, you will develop your recommendation to buy, hold, or sell the stock of this company.

It is very rare for one company to have only positive facts. Most companies have some good facts and some weak facts. In Sections 1 and 2 of the Mini Equity Research Report, you will analyze a variety of financial data for your selected company. As the equity analyst, it is your responsibility to combine the positive and negative facts into one recommendation (buy, hold, or sell). It is important to consider the importance of each fact and acknowledge that there is no perfect answer. Your recommendation should be based on the strength of the positive facts while recognizing the risks from the negative facts.

This week, you will write the introduction (including your stock recommendation) and the conclusion of the Mini Equity Research Report. In addition, you will revise the four sections from the first four weeks of class and combine them into this Mini Equity Research Report. Finally, you will submit your final Appendices A, B, C, and D with the Mini Equity Research Report.

Prepare:

Prior to beginning work on this final project,

  • Complete the Week 5 – Learning Activity: Understanding Cost of Capital.
  • Review the feedback you have received on your assignments throughout this course.
  • Locate and revise (if necessary) all of your assignments from Weeks 1 through 4.

Write:

In your Mini Equity Research Report,

  • Write an introduction. In your introduction, include the following:
    • State the name of the company and a brief description of what it does.
    • State the current market price per share and total market capitalization of the company.
    • State two key historical financial performance facts about your company (you can ascertain this information from your Week 1 – Assignment 3, Section 1: Financial Statement Analysis).
      • Categorize the overall financial performance as strong, neutral, or weak.
      • Justify your assessment based on the key facts.
    • Summarize (briefly) the ratio performance of the company.
      • Categorize the overall ratio performance as strong, neutral, or weak.
      • Justify your assessment based on the key facts.
    • Determine the valuation conclusion based on the constant growth formula in Week 4, using the required rate of return derived from the CAPM.
    • Determine your recommendation of buy, hold, or sell the stock of your chosen company.
  • Include your revised Week 1 – Assignment 3, Section 1: Financial Statement Analysis.
  • Include your revised Week 2 – Assignment 3, Section 2: Financial Ratio Analysis.
  • Include your revised Week 3 – Assignment, Section 3: Dividend Analysis and Preliminary Valuation, Part 1: Dividend Analysis only
  • Include your revised Week 4 – Assignment, Section 4: Valuation Conclusion.
  • Write a conclusion. In your conclusion, include the following:
    • Summarize the analysis that was completed for the Mini Equity Research Report.
    • State your recommendation of buy, hold, or sell the stock of your chosen company.
    • Summarize the key facts supporting your recommendation, including your concluded stock price.
  • Include Appendices A, B, C and D.

Submission Format:

You need submit a total of five documents to Waypoint:

  • Mini Equity Research Report
  • Appendix A
  • Appendix B
  • Appendix C
  • Appendix D

The Mini Equity Research Report,

Carefully review the Grading Rubric (Links to an external site.) for the criteria that will be used to evaluate your assignment.

Mini Equity Research Report [WLO: 4] [CLOs: 1, 2, 3, 4]

Many investment banks employ analysts to write equity research reports on public companies to advise their clients on their stock investments. In many cases, an initial equity research report is 20 to 50 pages long! For this class, you will focus on only three of the many important sections typically included in an equity research report. Thankfully, your Mini Equity Research Report will be much shorter than those published by investment banks!

In Week 1, you chose a publicly traded company to use throughout this class for the Mini Equity Research Report. In the first section of the Mini Equity Research Report, you evaluate the historical financial performance of the company (Week 1). In the second section of the Mini Equity Research Report, you evaluate the company’s performance using common financial ratios, and you compare the company to the competitor’s performance with the same financial ratios (Week 2). Finally, in Sections 3 and 4 of the report, you develop a value for the company’s stock and compare your value to the current market price of the stock (Weeks 3 and 4). Based on the analysis you present in these four sections, you will develop your recommendation to buy, hold, or sell the stock of this company.

It is very rare for one company to have only positive facts. Most companies have some good facts and some weak facts. In Sections 1 and 2 of the Mini Equity Research Report, you will analyze a variety of financial data for your selected company. As the equity analyst, it is your responsibility to combine the positive and negative facts into one recommendation (buy, hold, or sell). It is important to consider the importance of each fact and acknowledge that there is no perfect answer. Your recommendation should be based on the strength of the positive facts while recognizing the risks from the negative facts.

This week, you will write the introduction (including your stock recommendation) and the conclusion of the Mini Equity Research Report. In addition, you will revise the four sections from the first four weeks of class and combine them into this Mini Equity Research Report. Finally, you will submit your final Appendices A, B, C, and D with the Mini Equity Research Report.

Prepare:

Prior to beginning work on this final project,

Complete the Week 5 – Learning Activity: Understanding Cost of Capital.

Review the feedback you have received on your assignments throughout this course.

Locate and revise (if necessary) all of your assignments from Weeks 1 through 4.

Write:

In your Mini Equity Research Report,

Write an introduction. In your introduction, include the following:

State the name of the company and a brief description of what it does.

State the current market price per share and total market capitalization of the company.

State two key historical financial performance facts about your company (you can ascertain this information from your Week 1 – Assignment 3, Section 1: Financial Statement Analysis).

Categorize the overall financial performance as strong, neutral, or weak.

Justify your assessment based on the key facts.

Summarize (briefly) the ratio performance of the company.

Categorize the overall ratio performance as strong, neutral, or weak.

Justify your assessment based on the key facts.

Determine the valuation conclusion based on the constant growth formula in Week 4, using the required rate of return derived from the CAPM.

Determine your recommendation of buy, hold, or sell the stock of your chosen company.

Include your revised Week 1 – Assignment 3, Section 1: Financial Statement Analysis.

Include your revised Week 2 – Assignment 3, Section 2: Financial Ratio Analysis.

Include your revised Week 3 – Assignment, Section 3: Dividend Analysis and Preliminary Valuation, Part 1: Dividend Analysis only

Include your revised Week 4 – Assignment, Section 4: Valuation Conclusion.

Write a conclusion. In your conclusion, include the following:

Summarize the analysis that was completed for the Mini Equity Research Report.

State your recommendation of buy, hold, or sell the stock of your chosen company.

Summarize the key facts supporting your recommendation, including your concluded stock price.

Include Appendices A, B, C and D.

Submission Format:

You need submit a total of five documents to Waypoint:

Mini Equity Research Report

Appendix A

Appendix B

Appendix C

Appendix D

The Mini Equity Research Report,

Must be eight to ten double-spaced pages in length including any tables or calculations (but not including title and reference pages) and formatted according to APA Style (Links to an external site.) as outlined in the Writing Center’s APA Formatting for Microsoft Word (Links to an external site.)

Must include a separate title page with the following:

Title of project in bold font

Space should be between title and the rest of the information on the title page.

Student’s name

Name of institution (The University of Arizona Global Campus)

Course name and number

Instructor’s name

Due date

Must utilize academic voice. See the Academic Voice (Links to an external site.) resource for additional guidance.

Must include an introduction and conclusion paragraph. Your introduction paragraph needs to end with a clear thesis statement that indicates the purpose of your paper.

For assistance on writing Introductions & Conclusions (Links to an external site.) as well as Writing a Thesis Statement (Links to an external site.), refer to the Writing Center resources.

Must document any information used from sources in APA Style as outlined in the Writing Center’s APA: Citing Within Your Paper (Links to an external site.)

Must include a separate reference page that is formatted according to APA Style as outlined in the Writing Center. See the APA: Formatting Your References List (Links to an external site.) resource in the Writing Center for specifications. For help citing the information from Mergent, see the BUS401: Principles of Finance Research Guide.

Carefully review the Grading Rubric (Links to an external site.) for the criteria that will be used to evaluate your assignment.

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Verizon Communications Inc (NYS: VZ)
General Company Information
Principal Office Website
1095 Avenue of the Americas New York, NY 10036 USA www.verizon.com
Phone Primary NAICS
212 395-1000 551112 : Offices of Other Holding Companies
Auditor Closing Stock Price
Ernst & Young LLP 51.24 (as of 11/18/2021)
Number of Employees Incorporated
132,200 (Approximate Full-Time as of 12/31/2020) October 1983 , DE, United States
Country Mergent Dividend Achiever
United States No
Exchange and Ticker Number of Shareholders
NYS : VZ 510,654 (record) (as of 12/31/2020)
Primary SIC
4813 : Telephone communications, exc. radio
Business Summary
Verizon Communications is a holding company. Through its subsidiaries, Co. provides communications, information and entertainment products and services to consumers, businesses and governmental agencies. Co. has two reportable segments: Verizon Consumer
Group, which provides consumer-focused wireless and wireline communications services and products under the Verizon brand and through wholesale and other arrangements; and Verizon Business Group, which provides wireless and wireline communications
services and products, including data, video and data conferencing services, security and managed network services, local and long distance voice services and network access.
Company Financials
Income Statement
Exchange rate used is that of the Year End reported date
As Reported Annual Income Statement
Report Date 12/31/2020 12/31/2019 12/31/2018
Currency USD USD USD
Audit Status Not Qualified Not Qualified Not Qualified
Consolidated Yes Yes Yes
Scale Thousands Thousands Thousands
Service revenues & other revenues $ 109,872,000 $ 110,305,000 $ 108,605,000
Wireless equipment revenues $ 18,420,000 $ 21,563,000 $ 22,258,000
Total operating revenues $ 128,292,000 $ 131,868,000 $ 130,863,000
Cost of services (exclusive of items shown below) $ 31,401,000 $ 31,772,000 $ 32,185,000
Wireless cost of equipment $ 19,800,000 $ 22,954,000 $ 23,323,000
Selling, general & administrative expense $ 31,573,000 $ 29,896,000 $ 31,083,000
Depreciation & amortization expense $ 16,720,000 $ 16,682,000 $ 17,403,000
Oath goodwill impairment $ 186,000 $ 4,591,000
Total operating expenses $ 99,494,000 $ 101,490,000 $ 108,585,000
Operating income $ 28,798,000 $ 30,378,000 $ 22,278,000
Equity in earnings (losses) of unconsolidated businesses $ (45,000) $ (15,000) $ (186,000)
Interest income $ 65,000 $ 121,000 $ 94,000
Other components of net periodic benefit income (cost) $ (425,000) $ 627,000 $ 3,068,000
Early debt extinguishment costs $ (129,000) $ (3,604,000)
Other income (expense), net $ (50,000) $ (44,000) $ (798,000)
Other income & (expense), net $ (539,000) $ (2,900,000) $ 2,364,000
Interest expense $ 4,247,000 $ 4,730,000 $ 4,833,000
Income (loss) before provision (benefit) for income taxes – domestic $ 22,844,000 $ 21,655,000 $ 19,801,000
Income (loss) before provision (benefit) for income taxes – foreign $ 1,123,000 $ 1,078,000 $ (178,000)
Income (loss) before provision (benefit) for income taxes $ 23,967,000 $ 22,733,000 $ 19,623,000
Current federal provision (benefit) for income taxes $ 2,826,000 $ 518,000 $ 2,187,000
Current foreign provision (benefit) for income taxes $ 159,000 $ 221,000 $ 267,000
Current state & local provision (benefit) for income taxes $ 1,081,000 $ 974,000 $ 741,000
Total current provision (benefit) for income taxes $ 4,066,000 $ 1,713,000 $ 3,195,000
Deferred federal provision (benefit) for income taxes $ 1,432,000 $ 1,150,000 $ 175,000
Deferred foreign provision (benefit) for income taxes $ 1,000 $ (13,000) $ 30,000
Deferred state & local provision (benefit) for income taxes $ 120,000 $ 95,000 $ 184,000
Total deferred provision (benefit) for income taxes $ 1,553,000 $ 1,232,000 $ 389,000
Provision (benefit) for income taxes $ 5,619,000 $ 2,945,000 $ 3,584,000
Net income (loss) $ 18,348,000 $ 19,788,000 $ 16,039,000
Net income attributable to noncontrolling interests $ (547,000) $ (523,000) $ (511,000)
Net income (loss) attributable to Verizon Communications Inc. $ 17,801,000 $ 19,265,000 $ 15,528,000
Weighted average shares outstanding – basic 4,140,000 4,138,000 4,128,000
Weighted average shares outstanding – diluted 4,142,000 4,140,000 4,132,000
Year end shares outstanding 4,138,130 4,135,828 4,132,033
Net earnings (loss) per common share – basic $ 4.30 $ 4.66 $ 3.76
Net earnings (loss) per common share – diluted $ 4.30 $ 4.65 $ 3.76
Dividends declared $ 2.49 $ 2.44 $ 2.39
Total number of employees 132200 135000 144500
Total number of stockholders 510654 605414 630756
Foreign currency translation adjustments 180000 16000 -117000
Balance Sheet
Exchange rate used is that of the Year End reported date
As Reported Annual Balance Sheet
Report Date 12/31/2020 12/31/2019 12/31/2018
Currency USD USD USD
Audit Status Not Qualified Not Qualified Not Qualified
Consolidated Yes Yes Yes
Scale Thousands Thousands Thousands
Cash & cash equivalents $ 22,171,000 $ 2,594,000 $ 2,745,000
Accounts receivable, gross $ 26,162,000 $ 25,867,000
Less: allowances – accounts receivable $ 733,000 $ 765,000
Accounts receivable $ 25,169,000
Less allowance for credit losses $ 1,252,000
Accounts receivable, net $ 23,917,000 $ 25,429,000 $ 25,102,000
Inventories $ 1,796,000 $ 1,422,000 $ 1,336,000
Prepaid taxes $ 1,200,000
Deferred contract costs $ 2,472,000
Restricted cash $ 1,195,000
Other prepaid expenses & other current assets $ 1,843,000
Prepaid expenses & other current assets $ 6,710,000 $ 8,028,000 $ 5,453,000
Total current assets $ 54,594,000 $ 37,473,000 $ 34,636,000
Land $ 608,000 $ 594,000 $ 807,000
Buildings & equipment $ 32,933,000 $ 31,216,000 $ 30,468,000
Central office & other network equipment $ 160,369,000 $ 152,733,000 $ 147,250,000
Cable, poles & conduit $ 56,814,000 $ 52,658,000 $ 49,859,000
Leasehold improvements $ 9,497,000 $ 9,072,000 $ 8,580,000
Work in progress $ 8,576,000 $ 9,234,000 $ 6,362,000
Furniture, vehicles & other plant, property & equipment $ 10,940,000 $ 10,227,000 $ 9,509,000
Property, plant & equipment $ 279,737,000 $ 265,734,000 $ 252,835,000
Less accumulated depreciation $ 184,904,000 $ 173,819,000 $ 163,549,000
Property, plant & equipment, net $ 94,833,000 $ 91,915,000 $ 89,286,000
Investments in unconsolidated businesses $ 589,000 $ 558,000 $ 671,000
Wireless licenses $ 96,097,000 $ 95,059,000 $ 94,130,000
Goodwill $ 24,773,000 $ 24,389,000 $ 24,614,000
Other intangible assets, net $ 9,413,000 $ 9,498,000 $ 9,775,000
Operating lease right-of-use assets $ 22,531,000 $ 22,694,000
Other assets $ 13,651,000 $ 10,141,000 $ 11,717,000
Total assets $ 316,481,000 $ 291,727,000 $ 264,829,000
Debt maturing within one year $ 5,889,000 $ 10,777,000 $ 7,190,000
Accounts payable $ 6,667,000 $ 7,725,000 $ 7,232,000
Accrued expenses $ 6,050,000 $ 5,984,000 $ 5,948,000
Accrued vacation, salaries & wages $ 5,057,000 $ 4,885,000 $ 6,268,000
Interest payable $ 1,452,000 $ 1,441,000 $ 1,570,000
Taxes payable $ 1,432,000 $ 1,771,000 $ 1,483,000
Accounts payable & accrued liabilities $ 20,658,000 $ 21,806,000 $ 22,501,000
Current operating lease liabilities $ 3,485,000 $ 3,261,000
Dividends payable $ 2,618,000 $ 2,566,000 $ 2,512,000
Contract liability $ 4,843,000 $ 4,651,000 $ 4,207,000
Other current liabilities $ 2,167,000 $ 1,807,000 $ 1,520,000
Other current liabilities $ 9,628,000 $ 9,024,000 $ 8,239,000
Total current liabilities $ 39,660,000 $ 44,868,000 $ 37,930,000
Notes payable & other long-term debt $ 107,272,000
Verizon Communications $ 122,236,000 $ 101,699,000
Alltel Corporation $ 96,000 $ 96,000
Assumed notes $ 234,000
Debentures $ 766,000 $ 766,000 $ 796,000
Notes payable, debentures & other long-term debt $ 444,000
GTE LLC $ 391,000 $ 391,000
Asset-backed debt $ 10,630,000 $ 12,393,000 $ 10,101,000
Finance lease obligations $ 1,284,000 $ 1,116,000 $ 905,000
Unamortized discount, net of premium $ (6,057,000) $ (4,480,000) $ (6,298,000)
Unamortized debt issuance costs $ (604,000) $ (492,000) $ (541,000)
Long-term debt, including current maturities $ 128,742,000 $ 111,489,000 $ 112,913,000
Less: long-term debt maturing within one year $ 5,569,000 $ 10,777,000 $ 7,040,000
Long-term debt $ 123,173,000 $ 100,712,000 $ 105,873,000
Employee benefit obligations $ 18,657,000 $ 17,952,000 $ 18,599,000
Deferred income taxes $ 35,711,000 $ 34,703,000 $ 33,795,000
Non-current operating lease liabilities $ 18,000,000 $ 18,393,000
Other liabilities $ 12,008,000 $ 12,264,000 $ 13,922,000
Total long-term liabilities $ 207,549,000 $ 184,024,000 $ 172,189,000
Common stock $ 429,000 $ 429,000 $ 429,000
Additional paid in capital $ 13,404,000 $ 13,419,000 $ 13,437,000
Retained earnings (accumulated deficit) $ 60,464,000 $ 53,147,000 $ 43,542,000
Foreign currency translation adjustments $ (404,000) $ (584,000) $ (600,000)
Unrealized gain (loss) on cash flow hedges $ (1,387,000) $ (816,000) $ (80,000)
Unrealized gain (loss) on marketable securities $ 25,000 $ 27,000 $ 20,000
Defined benefit pension & postretirement plans $ 1,695,000 $ 2,371,000 $ 3,030,000
Accumulated other comprehensive income (loss) $ (71,000) $ 998,000 $ 2,370,000
Common stock in treasury $ 6,719,000 $ 6,820,000 $ 6,986,000
Deferred compensation – employee stock ownership plans & other $ (335,000) $ (222,000) $ (353,000)
Noncontrolling interests $ 1,430,000 $ 1,440,000 $ 1,565,000
Total equity $ 69,272,000 $ 62,835,000 $ 54,710,000
Cash Flows
Exchange rate used is that of the Year End reported date
As Reported Annual Cash Flow
Report Date 12/31/2020 12/31/2019 12/31/2018
Currency USD USD USD
Audit Status Not Qualified Not Qualified Not Qualified
Consolidated Yes Yes Yes
Scale Thousands Thousands Thousands
Net income (loss) $ 18,348,000 $ 19,788,000 $ 16,039,000
Depreciation & amortization expense $ 16,720,000 $ 16,682,000 $ 17,403,000
Employee retirement benefits $ 840,000 $ (284,000) $ (2,657,000)
Deferred income taxes $ 1,553,000 $ 1,232,000 $ 389,000
Provision for uncollectible accounts $ 1,588,000 $ 980,000
Provision for expected credit losses $ 1,380,000
Equity in losses (earnings) of unconsolidated businesses, net of dividends received $ 91,000 $ 74,000 $ 231,000
Oath goodwill impairment $ 186,000 $ 4,591,000
Accounts receivable $ 189,000 $ (1,471,000) $ (2,667,000)
Inventories $ (369,000) $ (76,000) $ (324,000)
Prepaid expenses & other assets $ 1,202,000 $ (2,807,000) $ 37,000
Accounts payable & accrued liabilities & other current liabilities $ (966,000) $ (2,359,000) $ 1,777,000
Discretionary employee benefits contributions $ (300,000) $ (1,679,000)
Net loss (gain) on sale of divested businesses $ 94,000
Other operating activities, net $ 2,780,000 $ 3,399,000 $ 219,000
Net cash flows from operating activities $ 41,768,000 $ 35,746,000 $ 34,339,000
Capital expenditures (including capitalized software) $ (18,192,000) $ (17,939,000) $ (16,658,000)
Acquisitions of investments & businesses, net of cash acquired $ (29,000) $ (230,000)
Acquisitions of businesses, net of cash acquired $ (520,000)
Acquisitions of wireless licenses $ (2,126,000) $ (898,000) $ (1,429,000)
Proceeds from disposition of businesses $ 28,000
Other investing activities, net $ (2,674,000) $ 1,257,000 $ 383,000
Net cash flows from investing activities $ (23,512,000) $ (17,581,000) $ (17,934,000)
Proceeds from long-term borrowings $ 25,822,000 $ 10,079,000 $ 5,967,000
Proceeds from asset-backed long-term borrowings $ 5,635,000 $ 8,576,000 $ 4,810,000
Repayments of long-term borrowings & capital lease obligations $ (17,584,000) $ (10,923,000)
Repayments of long term borrowings & finance lease obligations $ (9,775,000)
Repayments of asset-backed long-term borrowings $ (7,413,000) $ (6,302,000) $ (3,635,000)
Dividends paid $ (10,232,000) $ (10,016,000) $ (9,772,000)
Other financing activities, net $ (2,712,000) $ (2,917,000) $ (1,824,000)
Net cash flows from financing activities $ 1,325,000 $ (18,164,000) $ (15,377,000)
Increase (decrease) in cash, cash equivalents & restricted cash $ 19,581,000 $ 1,000 $ 1,028,000
Cash, cash equivalents & restricted cash, beginning of period $ 3,917,000 $ 3,916,000 $ 2,888,000
Cash, cash equivalents & restricted cash, end of period $ 23,498,000 $ 3,917,000 $ 3,916,000
Cash paid for income taxes, net of amounts refunded $ 2,725,000 $ 3,583,000 $ 2,213,000
Cash paid for interest, net of amounts capitalized $ 4,420,000 $ 4,714,000 $ 4,408,000

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Verizon Communications Inc (NYS: VZ)
General Company Information
Principal Office Website
1095 Avenue of the Americas New York, NY 10036 USA www.verizon.com
Phone Primary NAICS
212 395-1000 551112 : Offices of Other Holding Companies