Verizon Communications Inc.

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1 Grade Earnings Last Earnings Release 10/19/2017 Last Qtr. Actual vs. Est. $0.98 / $0.97 Next Release 01/23/2018 $0.98 Year Ending 12/31/2016 $3.90 Quick Facts Dividend Yield 4.37% 52 Wk High $ Wk Low $42.89 Short Interest 1% of float $ /12/2017 Rated 'BUY' since Aug 5th, 2017, when it was upgraded from 'HOLD' Year Ending 12/31/2017 $4.02 Market Cap $217.0B Overview Company Performs Well In Fundamental Analysis MarketGrader currently has a BUY rating on Verizon Communications Inc. (VZ), based on a final overall grade of scored by the company's fundamental analysis. scores at the 94th percentile among all 5815 North American equities currently followed by MarketGrader. Our present rating dates to August 5, 2017, when it was upgraded from a HOLD. Relative to the Major Telecommunications subindustry, which is comprised of 22 companies, Verizon Communications Inc.'s grade of ranks second. The industry grade leader is PT Telekomunikasi Indonesia (Persero) Tbk Sponsored ADR Class B (TLK) with an overall grade of The stock, up 9.54% in the last six months, has outperformed both the Major Telecommunications group, up 3.64% and the S&P 500 Index, which has returned 9.0% in the same period. Please go to pages two and three of this report for a complete breakdown of VZ's fundamental analysis. Price, Rating and Sentiment History - 2 Years 1

2 Growth B- While Not Entirely Negative, Growth Indicators Show Several Signs of Weakness Verizon Communications sales growth record showed a modest Market Growth LT F improvement in its latest quarterly report. Its total revenue increased 2.52% during the period to $31.72 billion from $30.94 billion booked in the Market Growth ST B- year earlier quarter. This compares favorably to the company's 0.43% EPS Growth A+ decline in 12-month trailing sales over a three year period. Including the latest quarter, Verizon Communications had $ billion in 12-month Growth Potential D trailing sales compared to $ billion in the comparable period ended three years ago. The latest improvement is not large enough to reverse a Earnings Momentum B- long term declining trend, something that will require one or two more quarters of much better top line growth. It reported very modest profit Earnings Surprise C growth last quarter relative to the same quarter a year ago, which at least is better than its ongoing long term profit decline and might signal the beginning of a new trend. We measure long term profit growth as the change in full year net income (based on four rolling quarters) from the equivalent period three years ago. The company is showing accelerating margin growth over the last three quarters, an important trend for future earnings growth. Its average growth in EBITDA, operating and net margins in its latest year-overyear quarterly comparison was 13.67%. The company's stock had a moderate 1.81% gain after its October 19, 2017 earnings report, which beat the number analysts were expecting by 1.03%. This positive announcement is not enough to reverse its long term negative earnings surprise record, calculated by MarketGrader as the average over the last six quarterly surprises; during this time the company missed analysts' estimates by 0.20%, a poor indicator for the stock. Revenue Qtrly. 09/30/2017 $31.7B Revenue Qtrly. Year Ago $30.9B Revenue 1 Yr. Chg. 2.52% Revenue 12 Mo. Tr. Latest $124.4B Revenue 12 Mo. Tr. 3Y Ago $125B Revenue 12 Mo. Tr. 3Y Chg. (0.43%) Net Income Qtrly. 09/30/2017 $3.6B Net Income Qtrly. Year Ago $3.6B Net Income 1 Yr. Chg. 0% Net Income 12 Mo. Tr. Latest $15.9B Net Income 12 Mo. Tr. 3Y Ago $16.9B Net Income 12 Mo. Tr. 3Y Chg. (5.89%) Value B Assuming the Company's Fundamentals Don't Deteriorate in Coming Quarters, the Stock's Valuation is Acceptable at this Level Trading currently at times 12-month earnings per share, Verizon Capital Structure F Communications's stock is priced inexpensively relative to its EPS growth rate in the last five years. Our indicator looks at the 12-month period P/E Analysis A ended in each quarter within the last five years and calculates the Price/Book Ratio F company's annualized growth rate, which is then used to compute the stock's "optimum" P/E. Based on this analysis, Verizon Communications's Price/Cash Flow Ratio A earnings per share have grown strongly at an annualized rate of 29.28%. which translates into an optimum P/E ratio of 23.66, 41.38% higher than Price/Sales Ratio B where the stock trades now. The combination of such a high growth rate with an apparent margin expansion probably means the company has Market Value A been gaining market share in recent quarters without sacrificing financial performance, evidenced by its superior overall Profitability grade. This combination offers a strong case for future gains in the stock price. Currently the stock also has a forward P/E of 13.87, which interestingly enough is higher than its trailing P/E but lower than the S&P 500's forward P/E of Investors therefore see more value in the company's future earnings but not as much as they see in the market in general; coupled with the company's strong fundamentals, this situation could represent an interesting but risky opportunity, meaning short term volatility with the possibility of handsome returns in the long term. Verizon Communications's are trading at 8.10 times their book value, which is based on the company's stockholders' equity. However, MarketGrader's price to book value analysis is based on a company's tangible book value, which excludes goodwill and other intangibles from its assets. In this case, Verizon Communicationss' intangible assets of $ billion exceed its $26.85 billion in stockholders' equity by $ billion, which means its tangible book value is negative. This makes the shares' price to tangible book ratio meaningless. Thus, part of the risk of owning the company's shares lies in the possibility of a significant write-down of its intangible assets, which would automatically make its shares much more expensive than they currently appear to be. Based on the $5.46 in cash flow per share generated by the company in the last twelve months, at the current price of $53.19 the stock trades at 9.75 times cash flow, an attractive valuation considering the strength of its overall fundamentals. Its shares also trade at 1.74 times its trailing 12-month sales, a small 0.23% discount to the Major Telecommunications industry average price to sales ratio of Finally, from a value perspective, we look at how much bigger the company's market capitalization is than its latest operating profits after subtracting taxes. From this perspective Verizon Communications's market cap of $ billion, which is only 6.69 times larger than its latest quarterly net income (plus depreciation), seems like an attractive valuation. P/E Ratio 12 Mo. Tr. 09/30/ Optimum P/E Ratio Forward P/E Ratio S&P 500 Forward P/E Ratio Price to (Tangible) Book Ratio Price-to-Cash Flow Ratio 9.75 Price/Sales Ratio

3 Profitability A Profitability Record Is Excellent Across the Board Suggesting a Very Well Managed Operation Verizon Communications is very profitable and this is reflected across the Asset Utilization A- board in this category's indicators, with operating margins that exceed its peer group average and a very solid return on shareholder equity, all Capital Utilization A+ based on 12-month trailing data. The $15.93 billion in net profit it earned Operating Margins A- during the same period accounted for 12.80% of total revenue, a healthy net profit margin. The average operating margin for the Major Relative Margins A+ Telecommunications industry was 15.84% during the same period, 33.20% below the company's 23.62%. Based on how much it has earned Return on Equity A+ in the last four quarters, the return on Verizon Communications's common equity has been a remarkable 59.32% during this time, even though this Quality of Revenues A+ is below the 68.54% return on equity achieved in the year-earlier period. This metric plays an important role in how our system measures a company's management efficiency. Considering this recent deceleration in the company's business it will be important to monitor its considerable amount of leverage, with total debt 4.38 times the size of total equity. However, its results are still pretty strong and justify the current capital structure in which long term debt makes up 81.11% of Verizon Communications's total capital. Verizon Communications's core earnings in the last twelve months grew moderately from the twelve months ended a year earlier. The company's EBITDA for the most recent period was $47.68 billion, or 10.86% above the $43.01 billion earned from its core operations in the prior period. EBITDA is used by MarketGrader to measure the company's true earnings power since it includes interest expenses, income taxes, depreciation and amortization, all non-operating expenses, which are nevertheless accounted for in other parts of our analysis that look at EPS gains and net income. Cash Flow A Company's Cash Flow Is Very Well Managed as Our Analysis Reflects a Very Healthy Operation Verizon Communications's cash flow grew considerably in its latest Cash Flow Growth A+ quarter to $7.30 billion, a 52.18% increase from $4.80 billion reported in the year earlier period. This is a marked improvement from the 20.71% EBIDTA Margin B+ decline in cash flow in the last twelve months versus a year before and Debt/Cash Flow Ratio A- could represent a turning point for the company's operating profitability and its future earnings growth. The company's 9.75 net debt to EBITDA Interest Cov. Capacity A+ ratio at the end of last quarter was almost unchanged from last year's 9.49, which suggests it has no problems managing its leverage from the Economic Value A- cash flow it generates from operations. The ratio is based on $ billion in net debt, defined as total debt minus cash on hand, and EBITDA Retention Rate A+ of $11.59 billion. And while its cash on hand fell 30.34% during the last twelve months, so did the company's total debt as a percentage of total capital, from 83.90% last year to 81.40% in the most recently reported quarter. Therefore all of these numbers suggest Verizon Communications continues to be well capitalized, has plenty of room to take on extra debt if it needed to and is generally well positioned for future growth. It also has sufficient capital to withstand future shortfalls in the cash it generates from operations without having to downsize too drastically. An important part of our analysis, our Economic Value indicator measures the company's profitability not only after accounting for operating costs but also the cost of capital, both equity and debt. Verizon Communications had a total of $ billion in invested capital as of last quarter, including all forms of equity and long term debt. The company's total after tax cost of capital of 4.30% is pretty evenly distributed between equity and debt at 0.80% and 1.91% respectively. When subtracting the total cost of capital from Verizon Communications's 20.67% return on investment, based on 12-month trailing operating income, we arrive at 16.36% in economic value added (EVA). This number, which measures the company's true economic profit in the last year, represents a solid return to its shareholders. The company increased its quarterly common dividend on September 30, 2017 by 2.16%, to $0.590 cents a share from $0.578 cents. It has paid a dividend for at least 33 years and, based on this latest payout, the stock is currently yielding 4.37%. Verizon Communications, which recently increased its payout ratio, has spent $9.42 billion in common dividend payments during the last 12 months. This represents 42.23% of total cash flow and 59.15% of after-tax earnings, a modest increase from the 58.81% of earnings it paid out in the year ended a quarter earlier. The increasing trend of an already elevated payout is worth monitoring for signs fo liquidity problems even though the company's fundamentals are generally healthy. Cash Flow Qtrly. 09/30/2017 $7.3B Cash Flow Qtrly Year Ago $4.8B Cash Flow 1 Yr. Chg % Cash Flow 12 Mo. Tr. Latest $22.3B Cash Flow 12 Mo. Tr. 3Y Ago $33.6B Cash Flow 12 Mo. Tr. 3Y Chg. (33.59%) Free Cash Flow Last Qtr. $3B Economic Value Total Invested Capital $144.3B Return on Inv. Capital 20.67% Weighted Cost of Equity 1.91% Weighted Cost of Debt 2.39% Total Cost of Capital 4.30% Economic Value Added 16.36% 3

4 Profile operates as a holding company, which provides broadband and other wireless and wireline communications services to consumer, business, and government and wholesale customers. It also provides converged communications, information and entertainment services over America's most advanced fiber-optic network, and delivers integrated business solutions to customers. The company operates its business through two segments: Verizon Wireless and Wireline. The Verizon Wireless segment provides communications products and services including wireless voice and data services and equipment sales, which are provided to consumer, business and government customers across the United States. The Wireline segment provides communications products and services including local exchange and long distance voice service, broadband video and data, IP network services, network access and other services to consumers, small businesses and carriers in the United States, as well as to businesses and government customers. Verizon Communications was founded in 1983 and is headquartered in New York, NY. Key Facts: 1095 Avenue of the Americas New York,NY Phone: Biggest Company in Sub-Industry AT&T Inc. (T) Grade 57.4 Market Cap:$ billion Smallest Company in Sub-Industry Alaska Communications Sys Grade 29.2 Market Cap:$ million MarketGrader Dilution Analysis Impact of Change in Shares on EPS - Q Dilution Summary Income Statement Last Qtr (09/2017) 12 Mo. Trailing Revenue $31.7B $124.4B *EPS Latest $0.89 *EPS Year Ago $0.89 EPS Change 1 Yr. 0% C. Shares - Latest(M) 4,089 C. Shares - Yr Ago(M) 4,086 C. Shares - 1Yr Chg. 0% EPS if Yr. Ago Shares $0.89 EPS Chg. if Yr. Ago 0% EPS Loss from Dilution $0.00 *Earnings per share are based on fully diluted net income per share excluding extrodinary items. This number may not match the headline number reported by the company. Op. Income $7.4B $29.4B Net Income $3.6B $15.9B *EPS $ *Earnings per share are based on fully diluted net income per share excluding extrodinary items. This number may not match the headline number reported by the company. Balance Sheet Total Assets Total Debt Latest $254.7B $117.5B Stockholders Eq. $26.8B All numbers in millions except EPS Ratios Price/Earnings (12 mo. trailing) Price/Tangible Book Price/Cash Flow 9.75 Price/Sales 1.74 Debt/Cash Flow Return on Equity 59.32% Gross Margin (12 mo. trailing) 46.79% Total Assets Intangible Assets $254.7B $160.3B '12 '13 '14 '15 '16 '17 Qtr Operating Margin (12 mo. trailing) 23.61% Net Profit Margin (12 mo. trailing) 12.80% Long Term Debt $115.3B Qtr Total Debt Book Value Enterprise Value $117.5B $26.8B $113.0B Qtr Qtr

5 Top Down Analysis Telecommunications Stocks in Sector: 92 Buys: 7 (7.61%) Holds: 16 (17.39%) Sells: 69 (75.00%) No. of stocks at: 52-Wk. High: 5 52-Wk. Low: 3 Above 50 & 200-day MA: 38 Below 50 & 200-day MA: 35 Major Telecommunications Stocks in Sub-Industry: 22 Buys: 4 (18.18%) Holds: 4 (18.18%) Sells: 14 (63.64%) No. of stocks at: 52-Wk. High: 2 52-Wk. Low: 0 Above 50 & 200-day MA: 11 Below 50 & 200-day MA: 5 # Ticker Grade Sentiment Name Price Next EPS 1 TLK N PT Telekomunikasi Indonesia (Persero) $ /27/ VZ 3 P $ /23/ VEON N VEON Ltd. Sponsored ADR $ /15/ NTL N Nortel Inversora SA Sponsored ADR Pfd $ /01/ QBR.A.C N Quebecor Inc. Class A $ /15/ QBR.B.C N Quebecor Inc. Class B $ /15/ TEO P Telecom Argentina SA Sponsored ADR $ /16/ SKM P SK Telecom Co., Ltd. Sponsored ADR $ /07/ BCE.CA N BCE Inc. $ /09/ T N AT&T Inc. $ /25/2018 # Ticker Grade Sentiment Name Price Next EPS 1 TLK N PT Telekomunikasi Indonesia (Persero) $ /27/ VZ 3 P $ /23/ NTL N Nortel Inversora SA Sponsored ADR Pfd $ /01/ TEO P Telecom Argentina SA Sponsored ADR $ /16/ BCE.CA N BCE Inc. $ /09/ T N AT&T Inc. $ /25/ PHI N PLDT, Inc Sponsored ADR $ /10/ BCE P BCE Inc. $ /09/ TU P TELUS Corporation $ /10/ BT N BT Group PLC Sponsored ADR $ /02/ Price Trend. A- 2. Price Momentum. B 3. Earnings Guidance. B 4. Short Interest. A+ 8.1 Copyright 2010 MarketGrader.com Corp. All rights reserved. Any unauthorized use or disclosure is prohibited. Neither the information nor any opinion expressed constitutes an offer to buy or sell any securities or any options, futures or other derivatives related to such securities ("related investments"). The information herein was obtained from various sources; we do not guarantee its accuracy or completeness. This research report is prepared for general circulation and is circulated for general information only. It does not have regards to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. Investors should seek financial advice regarding the appropriateness of investing in any securities or investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. Investors should note that income from such securities, if any, may fluctuate and that each security's price or value may rise or fall. Accordingly, investors may receive back less than originally invested. Past performance is not necessarily a guide to future performance. Future returns are not guaranteed, and a loss of original capital may occur. MarketGrader does not make markets in any of the securities mentioned in this report. MarketGrader does not have any investment banking relationships. MarketGrader and its employees may have long/short positions or holdings in the securities or other related investments of companies mentioned herein. Officers or Directors of MarketGrader.com Corp. are not employees of covered companies. MarketGrader or any of its employees do not own shares equal to one percent or more of the company in this report. 5