Benzinga | Jul 30, 2021 10:56AM EDT

Return on Capital Employed Overview: Verizon Communications

After pulling data from Benzinga Pro it seems like during Q2, Verizon Communications (NYSE:VZ) earned $8.16 billion, a 5.08% increase from the preceding quarter. Verizon Communications also posted a total of $33.76 billion in sales, a 2.73% increase since Q1. In Q1, Verizon Communications earned $7.77 billion, and total sales reached $32.87 billion.

Why ROCE Is Significant

Changes in earnings and sales indicate shifts in Verizon Communications's Return on Capital Employed, a measure of yearly pre-tax profit relative to capital employed by a business. Generally, a higher ROCE suggests successful growth of a company and is a sign of higher earnings per share in the future. In Q2, Verizon Communications posted an ROCE of 0.11%.

It is important to keep in mind ROCE evaluates past performance and is not used as a predictive tool. It is a good measure of a company's recent performance, but several factors could affect earnings and sales in the near future.

Return on Capital Employed is an important measurement of efficiency and a useful tool when comparing companies that operate in the same industry. A relatively high ROCE indicates a company may be generating profits that can be reinvested into more capital, leading to higher returns and growing EPS for shareholders.

In Verizon Communications's case, the positive ROCE ratio will be something investors pay attention to before making long-term financial decisions.

Upcoming Earnings Estimate

Verizon Communications reported Q2 earnings per share at $1.37/share, which beat analyst predictions of $1.29/share.