BCE (BCE) Up 1.7% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for BCE (BCE). Shares have added about 1.7% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is BCE due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

BCE Q1 Earnings Match Estimates, Revenues Increase Y/Y

BCE reported healthy first-quarter 2019 financial results, wherein both revenues and earnings increased year over year.

Net Earnings

Quarterly net earnings increased 12% year over year to C$740 million ($556.5 million) or C$0.82 (62 cents) per share, driven by growth in adjusted EBITDA and higher other income.

Adjusted net earnings came in at C$692 million or C$0.77 per share ($520.4 million or 58 cents per share) compared with C$719 million or C$0.80 per share in the prior-year quarter. The bottom line matched the Zacks Consensus Estimate.

Revenues

The Canadian telecommunications company’s quarterly total operating revenues increased 2.6% year over year to C$5,734 million ($4,312.3 million), beating the consensus estimate of $4,288 million. The rise was driven by gains in broadband wireless, Internet, TV and streaming customers.

Segmental Performance

Operating revenues from Bell Wireless increased 4.5% year over year to C$2,112 million ($1,588.4 million). Service revenues improved 3.4% to C$1,566 million, reflecting healthy subscriber base expansion. Product revenues increased 7.7% to C$546 million due to increased sales of higher-value smartphones.

Operating revenues from Bell Wireline increased 1.8% year over year to C$3,064 million ($2,304.3 million), reflecting top-line growth across Bell’s residential, business and wholesale units. Service revenues were up 1.1% to C$2,920 million, driven by growth in Internet and IPTV subscriber base, higher household ARPU, and improved Bell Business Markets performance from IP broadband connectivity. Product revenues increased 20% to C$144 million. The year-over-year improvement was led by strong data product sales to large enterprise customers and higher sales of consumer electronics.

Bell Media generated revenues of C$745 million ($560.3 million), down 0.5% year over year primarily due to lower advertising revenues.

Other Details

Adjusted EBITDA was C$2,409 million, up 6.9%, driven by year-over-year increase of 11.6% at Bell Wireless, 2% at Bell Wireline and 26.9% at Bell Media. Adjusted EBITDA margin improved to 42% from 40.3%, reflecting the high flow-through of wireless and wireline revenue growth, increased broadband Internet scale and the favorable year-over-year benefit on adjusted EBITDA from the application of IFRS 16.

Cash Flow and Liquidity

During first-quarter 2019, BCE generated C$1,516 million ($1,140.1 million) of cash from operations compared with C$1,496 million in the year-ago quarter. Free cash flow for the same period was C$642 million ($482.8 million) compared with C$537 million in the prior-year quarter.

As of Mar 31, 2019, the company had C$668 million ($500.2 million) in cash and equivalents with C$22,016 million ($16,486.9 million) of long-term debt.

2019 Outlook Reiterated

BCE has reiterated its financial targets for 2019 (as provided on Feb 7, 2019) in accordance with IFRS 16 accounting standards. The company expects revenues to grow between 1% and 3%. While adjusted EBITDA is expected to rise 5-7%, adjusted EPS is expected between C$3.48 and C$3.58. Free cash flow is estimated to grow in the range of 7-12%.

Conversion rate used:

C$1 = $0.752060 (period average from Jan 1, 2019 to Mar 31, 2019)

C$1 = $0.748861 (as of Mar 31, 2019)

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

Currently, BCE has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. Notably, BCE has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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