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Can BCE Inc. (BCE) Spring a Surprise this Earnings Season?

Zacks Equity Research

Leading Canadian telephone operator BCE Inc. BCE is scheduled to report first-quarter 2017 results on Apr 26, before the opening bell.

Last quarter, the company posted a negative earnings surprise of 3.39%. Moreover, the company’s earnings lagged the Zacks Consensus Estimate in three of the previous four quarters, with an average miss of 3.40%.

Over the past three months, BCE gained 1.7% while the Zacks categorized Diversified Communication Services industry witnessed growth of 5.1%.

Let’s see how things are shaping up for this announcement.

Factors Likely to Influence this Quarter

We are impressed with BCE’s efforts to strengthen itself in the field of advanced networks Fibe TV and Fibe Internet services and in the hosting and cloud suite.

BCE’s subsidiary, Bell Canada continues to rule the Canadian broadband communications market through the launch of Home Hub 3000 WiFi services with Wireless 4K Whole Home PVR from Fibe TV. Increasing deployment of Gigabit Fibe, 4G LTE mobile networks, IP phone services and post-paid businesses have helped the company gain customers in its post-paid wireless business and put a check on churn. BCE’s acquisition of Q9 Networks has strengthened its foothold in the cloud space. We further believe that significant investments in network coverage, customer retention, lucrative data plans and the launch of new handsets along with the provision of net protection might have driven customer addition.

The buyout of Manitoba Telecom Services Inc. ("MTS") has helped Bell Canada gain almost 710,000 wireless, Internet and IPTV customers in Manitoba, leading to a 5% increase in total broadband service subscribers. This positioned Bell Canada as one of the largest mobile providers in Manitoba with more than 470,000 total Bell and MTS wireless subscribers.

However, BCE’s strategic moves to enhance employee skills, increase capital investments and reduce expenditures may impact financials and growth prospects if not executed properly. Moreover, stringent regulatory measures, decline in network access services lines, price competition, exposure to labor union issues covered by collective bargaining agreements leading to work disruptions and higher labor costs, operational risks, and construction and launch delays are major risks. In the wireless segment, BCE competes against the likes of Rogers Communications Inc. RCI and TELUS Corporation TU as well as small regional carriers in Canada.

Earnings Whispers

Our proven model does not conclusively show that BCE is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here as elaborated below.

Zacks ESP: BCE has an Earnings ESP of -3.08%. This is because the Most Accurate estimate stands at 63 cents while the Zacks Consensus Estimate is pegged at 65 cents. You can uncover the best stocks to buy or sell before they’re reported with ourEarnings ESP Filter.

Zacks Rank: BCE has a Zacks Rank #3 which increases the predictive power of ESP. However, the company’s negative ESP makes surprise prediction difficult.

Meanwhile, we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

BCE, Inc. Price and EPS Surprise

 

BCE, Inc. Price and EPS Surprise | BCE, Inc. Quote

Stock to Consider

PPL Corporation PPL from the Zacks categorized broader Utilities sector has the right combination of elements to post an earnings beat when it expectedly reports first-quarter 2017 results on May 4. PPL Corporation has an Earnings ESP of +1.61% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

The company’s earnings surpassed the Zacks Consensus Estimate in three of the previous four quarters, with an average beat of 4.29%.

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