BCE Inc. (BCE) Misses Earnings & Revenue Estimates In Q2

Leading Canadian telecom operator BCE Inc. (TO:BCE) reported disappointing financial results in the second quarter of 2016, with both the top and bottom line lagging the respective Zacks Consensus Estimate.

This Zacks Rank #4 (Sell) company competes with Rogers Communications Inc. (NYSE:RCI) , Shaw Communications Inc. (NYSE:SJR) and TELUS Corp. (NYSE:TU) in the highly competitive Canadian telecom market.

Quarterly net income was approximately $619 million, up 2% year over year. GAAP earnings per ADS (American Depository Share) were 62 cents, down 1.1% year over year. Adjusted net income per ADS came in at 66 cents, missing the Zacks Consensus Estimate of 71 cents.

Total revenue was approximately $3,981 million, up 0.3% year over year but well short of the Zacks Consensus Estimate of $4,149 million. Adjusted EBITDA (earnings before interest, tax, depreciation and amortization) was about $1,692 million, up 3.2% year over year. Quarterly adjusted EBITDA margin was 42.5% compared with 41.3% in the prior-year quarter.

Cash Flow

During the second quarter of 2016, BCE generated approximately $1,410 million of cash from operations, up 2.7% year over year. Free cash flow in the reported quarter was around $696.8 million, up 0.3% year over year.

BCE INC Price, Consensus and EPS Surprise

BCE INC Price, Consensus and EPS Surprise | BCE INC Quote

Segments in Detail

Bell Wireless: Revenues from Bell Wireless increased 2.2% to $1,294.3 million. Services revenues climbed 4.6% to approximately $1,201.1 million while product revenues decreased 23.5% to approximately $85 million. Blended average revenue per user improved 2.9% year over year to $48. Postpaid customer churn was 1.15% versus 1.23% in the year-ago quarter.

During the reported quarter, BCE added a net of 69,848 postpaid wireless subscribers compared with 61,033 in the prior-year quarter. As of Jun 30, 2016, the company had 7,471,069 postpaid subscribers, up 3.7% year over year. The total wireless subscriber base increased 1.9% to 8,280,693. At second-quarter end, 82% of the total postpaid wireless customers used smartphones compared with 77% at the end of the year-earlier quarter. The proportion of postpaid subscribers on LTE reached 76%, up from 57% a year earlier.

Bell Wireline: Revenues from Bell Wireline declined 2.1% year over year to approximately $2,222.3 million. Wireline data revenues were up 1.9% to $1,348 million. Local and access revenues declined 5.6% to $582.6 million. Long distance revenues were down 11.6% to $136.5 million.

Total network access services (NAS) lines fell 6.2% year over year to 6,476,683, at the end of the reported quarter. Residential NAS losses during the reported quarter were 68,593 compared with 75,819 in the year-ago quarter. Business NAS losses narrowed to 20,232 from 37,690 a year ago.

As of Jun 30, 2016, BCE had 2,750,596 TV subscribers, up 2.8% (including 1,265,786 Fibe TV customers, an increase of 21.6%) and 3,418,785 high-speed Internet subscribers, up 3.1% year over year. In the second quarter, Bell Wireline added a net of 7,539 high-speed Internet customers and 35,255 Fibe TV customers, but lost 33,154 satellite TV subscribers.

Bell Media: Bell Media generated quarterly revenues of approximately $581.1 million, up 5.3% year over year.

Guidance

BCE issued its financial guidance for 2016. The company expects adjusted earnings per share of C$3.45–C$3.55 while free cash flow growth is likely to be around 4–12%. Annual dividend per share is projected at C$2.73, reflecting a dividend payout policy of 65–75%. Revenue growth is expected at around 1–3%, while EBITDA growth is estimated at roughly 2–4%. Capital intensity projection is pegged at approximately 17%.