Verizon Communications Inc. (VZ - Analyst Report) reported strong financial numbers in the third quarter of 2015. Both the top and the bottom line surpassed the respective Zacks Consensus Estimate.

Verizon reported adjusted earnings per share of $1.04, beating the Zacks Consensus Estimate of $1.02. Quarterly net income came in at $4,171 million compared with $3,794 million in the year-ago quarter.

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Quarterly total revenue increased 5% year over year to $33,158 million outpacing the Zacks Consensus Estimate of $33,003 million.

Total operating expenses in the reported quarter was $25,623 million, up 3.8% year over year. Meanwhile, operating income stood at $7,535 million compared with $6,890 million in the year-ago quarter.

Cash Flow & Liquidity

During the first nine months of 2015, Verizon generated $28,426 million of cash from operations compared with $23,157 million in the first nine months of 2014. Free cash flow at the end of the reported period was $15,886 million compared with $10,533 million in the year-ago period.

At the end of third-quarter 2015, Verizon had $4,181 million of cash and short-term investments and $112,324 million of long-term debt compared with $11,153 million of cash and short-term investments and $110,536 million of debt outstanding at the end of 2014. The debt-to-capitalization ratio was 0.88 at the end of the reported quarter compared with 0.89 at the end of 2014.

Wireless Segment

Total revenue at the segment was $23,005 million, up 5.4% year over year. Service revenues were down 4.1% to $17,598 million. Other revenues totaled $1,115 million, up 11.6%. Equipment revenues increased 73.1% to $4,292 million.

Operating expenses increased 3.1% to $15,337 million. Operating income improved 10.3% to $7,668 million. Quarterly operating income margin stood at 33.3% in comparison with 31.9% in the third quarter of 2014. Segment EBITDA increased 9.2% to $9,928 million. EBITDA margin was 43.2% compared with 41.6% in the prior-year quarter.

At the end of the third quarter, Verizon had 110.760 million retail subscribers, up 4.3% year over year. Out of the total, retail postpaid subscriber count stood at 105.023 million, up 4.9% and Retail prepaid user count was 5.737 million, down 5.2%. During the reported quarter, the company added 1,289,000 postpaid customers (down 15% year over year) while prepaid customer count decreased by 0.08 million.

Quarterly retail postpaid churn rate was 0.93% compared with 1% in the year-ago quarter whereas total retail churn rate was 1.21% against 1.29% in the year-ago quarter. Meanwhile, retail postpaid average revenue per account (ARPA) dropped 5.5% to $152.38.

In the reported quarter, 91.3% of the total activated phones were smartphones compared with 91% in the prior-year quarter.

Wireline Segment

Total revenue at the segment was $9,355 million, down 2.3% year over year. Consumer retail revenues were up 2.8% at $4,012 million. Small business revenues grossed $585 million, down 4.6%. Strategic services revenues declined 2.7% to $2,012 million. Core revenues were down 8.6% to $1,196 million. Global wholesale revenues decreased 5.1% to $1,466 million and Other revenues declined 40.8% to $84 million.

Operating expenses decreased 6.1% to $8,778 million. Meanwhile, operating income jumped a whopping 156.4% to $577 million. Quarterly operating income margin came in at 6.2% against 2.3% in the year-ago quarter. Segment EBITDA fell a mere 0.1% to $2,200 million. EBITDA margin stood at 23.5% compared with 23% in the year-ago quarter.

At the end of the third quarter, FiOS video subscriber base was 5.807 million (up 5% year over year), FiOS Internet subscriber count stood at 6.935 million (up 7.2%) and FiOS digital voice residence connections totaled 4.703 million (up 4.2%). In the quarter under review, Verizon added 42,000 FiOS video subscribers and 114,000 FiOS Internet customers.

High-speed Internet connection tally dropped 14.5% to 2.288 million while total broadband connection number rose 0.8% to 9.223 million, Primary residence switched access connections decreased 14% to 4.982 million and Primary residence connections fell 6% to 9.685 million. Total retail residence voice connections declined 6.4% to 10.051 million and total voice connections decreased 6.7% to 18.740 million. Verizon lost 112,000 high-speed Internet subscribers in the reported quarter.

Stocks to Consider

Verizon currently carries a Zacks Rank #3 (Hold). Batter-ranked stocks in the same industry include T-Mobile US Inc. (TMUS - Analyst Report), CenturyLink Inc. (CTL - Analyst Report) and United States Cellular Corp. (USM - Analyst Report). All the three stocks currently carry a Zacks Rank #2 (Buy).