FBR Capital upgraded Verizon Communications (NYSE: VZ) from Market Perform to Outperform with a price target of $57.00 (from $55.00).

Analyst David Dixon said, "Our more constructive outlook is driven by: (1) an expected near-term M&A-based tailwind from the expected announcement of a Sprint/T-Mobile combination (which the market is increasingly discounting —incorrectly, in our view) and an increase in deal approval probability upon announcement from current consensus, which remains low; (2) continued momentum in wireless (coupled with a stronger nexus with its wireline asset) with expectation for mid-single-digit growth; and (3) moderating decline in wireline driven by increased adoption and penetration of FiOS and FiOS Quantum. If S and TMUS merge as we anticipate, integration activity will be substantial in order to better position this asset with consistency from improved coverage and capacity. Until the combined asset becomes an effective substitute to Verizon and AT&T in the high-end postpaid and enterprise segment, we would not expect substantial competitive pressure on the two larger incumbents in market segments where they currently enjoy an effective duopoly today. Meanwhile, Verizon and AT&T are not standing still, aggressively investing to deploy next-generation RAN and fiber across a greater proportion of the network grid, laying the foundation for a next-gen network that will be defined by access plus class of service (assuming regulatory flexibility continues), leveraging next-gen datacenter storage, processing, and LTE-A bandwidth resources."

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Shares of Verizon Communications closed at $50.91 yesterday.