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BCE Surpasses Q1 Earnings Estimates, Revenues Up Y/Y

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BCE Inc. BCE reported decent first-quarter 2021 results, wherein both the bottom line and the top line surpassed their respective Zacks Consensus Estimate. Broadband additions, higher revenues and accelerated network acceleration program on the back of a robust financial position drove the operating momentum. Shares of this Canada-based company inched up 0.9% on Apr 29, closing the trading session at $47.27.

Net Income

Net income in the March quarter declined 5.6% year over year to C$642 million or C$0.71 per share. The fall was primarily due to higher severance, acquisition and other costs accompanied by higher depreciation and amortization expense. However, it was partially offset by higher adjusted EBITDA and other income.

Quarterly adjusted net income came in at C$704 million ($555.9 million) or C$0.78 (62 cents) per share compared with C$714 million or C$0.79 per share in the prior-year quarter. The bottom line beat the Zacks Consensus Estimate by 4 cents.

BCE, Inc. Price, Consensus and EPS Surprise

BCE, Inc. Price, Consensus and EPS Surprise
BCE, Inc. Price, Consensus and EPS Surprise

BCE, Inc. price-consensus-eps-surprise-chart | BCE, Inc. Quote

Revenues

Total operating revenues improved 1.2% year over year to C$5,706 million ($4,505.3 million). Despite the adverse impacts of the pandemic on consumer and commercial activity, the company witnessed revenue growth, driven by higher product revenues. Solid demand for premium mobile phones and business telecom data equipment acted as a major tailwind.

However, service revenues declined 1% to C$4,968 million due to year-over-year fall in media advertising, wireless roaming and business customer spending on wireline services. The top line surpassed the consensus estimate of $4,500 million.

Notably, BCE added 108,468 new mobile, retail Internet and IPTV customers, up 51% year over year. The solid momentum reflects Bell’s augmented broadband market with continued leadership in traditional and digital media platforms. With investment of more than $1 billion in the reported quarter, the company remains focused on accelerating its broadband network acceleration program. Moreover, it is on track to reach up to 6.9 million customers with fiber and Wireless Home Internet connections by the end of 2021.

Quarterly Segment Results

Revenues in Bell Wireless increased 3.2% year over year to C$2,100 million, driven by higher product revenues and new customer additions. Service revenues slipped 2.1% to C$1,514 million, mainly due to lower roaming revenues and reduced data overage. Product revenues increased 20.1% to C$586 million. The impressive performance was mainly driven by favorable sales mix of high-end mobile phones coupled with solid consumer electronic sales, including higher online shopping. Further, mobile connected device net activations jumped 51.5% to 74,159 with robust demand for Bell IoT solutions.

Bell Wireline revenues improved 1.5% year over year to C$3,081 million. Despite lower spending by large business customers due to COVID-19 mayhem, service revenues inched up 0.9% to C$2,927 million as a result of higher Internet revenues. Product revenues, too, grew 14.1% to C$154 million, driven by higher data equipment sales to the government sector. Moreover, Bell TV added 10,696 new retail IPTV subscribers, up from 2,852 in the year-earlier quarter. The development reflects solid demand for new Virgin TV service and improved Bell Fibe TV performance, fueled by lower customer churn.

Bell Media generated revenues of C$713 million, down 5.2% year over year. The decline was due to reduced advertiser spending across radio and out-of-home platforms. However, it was partially offset by strong sports and news specialty performance and incremental contribution from French-language network — Noovo.

Other Details

Overall, adjusted EBITDA was C$2,429 million, up 0.5% year over year. This reflects increase of 2.1% in wireline, partially offset by declines of 0.5% in wireless and 7.7% in media. Adjusted EBITDA margin contracted to 42.6% from 42.9% owing to lower service revenues and higher low-margin product revenues.

Cash Flow & Liquidity

In the first three months of 2021, BCE generated C$1,992 million of cash from operating activities compared with C$1,451 million in the year-ago quarter. The increase was primarily driven by higher cash from working capital and lower income taxes. Free cash flow for the same period came in at C$940 million compared with C$611 million. The 53.8% surge was driven by higher cash flows from operating activities.

Capital expenditures increased 30.2% to C$1,012 million due to higher capital spending for 5G expansion, fueled by the deployment of Bell’s broadband fibre and Wireless Home Internet networks as part of its 2-year network investment plan.

As of Mar 31, 2021, the company had C$2,607 million ($2,070.2 million) in cash and cash equivalents with C$24,965 million ($19,824.7 million) of long-term debt.

2021 Outlook

Despite uncertainties related to the COVID-19 pandemic, BCE expects revenues and adjusted EBITDA to grow between 2% and 5%. Adjusted EPS is anticipated to grow between 1% and 6%. Free cash flow is estimated in the range of C$2,850-C$3,200 million.

Zacks Rank & Stocks to Consider

BCE currently has a Zacks Rank #3 (Hold).

A few better-ranked stocks in the broader sector are Cambium Networks Corporation CMBM, Ooma, Inc. OOMA and Corning Incorporated GLW, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Cambium delivered a trailing four-quarter earnings surprise of 128%, on average.

Ooma delivered a trailing four-quarter earnings surprise of 163.7%, on average.

Corning delivered a trailing four-quarter earnings surprise of 39%, on average.

Conversion rate used:

C$1 = $0.789573 (period average from Jan 1, 2021 to Mar 31, 2021)

C$1 = $0.794100 (as of Mar 31, 2021)

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