BCE Inc. (BCE) Surpasses Q1 Earnings And Revenue Estimates

Leading Canadian telecom operator, BCE Inc. (TO:BCE) reported strong financial results in the first quarter of 2017. Both the top and bottom line outpaced the Zacks Consensus Estimate.

Quarterly net income was approximately $513 million, down 5.4% year over year. However, GAAP earnings per share were 59 cents, down 4.9% year over year. Nevertheless, adjusted net income per ADS (American Depository Share) came in at 66 cents, surpassing the Zacks Consensus Estimate of 65 cents.

Total revenue was approximately $4,067.5 million, up 5.9% year over year beating the Zacks Consensus Estimate of $4061 million. Adjusted EBITDA (earnings before interest, tax, depreciation and amortization) came in at about $1,672.5 million, increasing 2.4% year over year. Quarterly adjusted EBITDA margin was 41.1% compared with 41% in the prior-year quarter.

Cash Flow

In the first quarter of 2017, BCE generated approximately $991.8 million of cash from operations, up 1.8% year over year. Free cash flow in the reported quarter was around $369.4 million, up 17% year over year.

Segments in Detail

Bell Wireless: Revenues from Bell Wireless increased 7.1% year over year to $1,370.3 million. Services revenues climbed 8% to approximately $1,295.5 million while product revenues decreased 5.7% to approximately $74.8 million. Blended average revenue per user improved 4.2% year over year to $49.60. Postpaid customer churn was 1.17% compared with 1.15% in the year-ago quarter.

During the reported quarter, BCE added a net of 35,782 postpaid wireless subscribers, up 38.7% year over year. As of Mar 31, 2017, the company had 8,144,936 postpaid subscribers, up 10% year over year. The total wireless subscriber base increased 8.6% to 8,946,476. The proportion of postpaid subscribers on LTE reached 83%, surging from 73% a year earlier.

Bell Wireline: Revenues from Bell Wireline service increased 0.7% year over year to approximately $2,072.1 million. Wireline product revenues decreased 8.8% to $179 million. Wireline data revenues were up 3% to $1,289.5 million. Local and access revenues decreased 1.8% to $585.4 million. Long distance revenues were down 12% to $126.9 million.

Total network access services (NAS) lines inched up 0.1% year over year to 6,574,274, at the end of the reported quarter. Residential NAS losses during the reported quarter were 73,421 compared with 67,428 in the year-ago quarter. Business NAS losses decreased to 29,853 from 40,204 a year ago.

As of Mar 31, 2017, BCE had 2,837,353 TV subscribers, up 3.2% (including 1,465,007 Fibe TV customers, increasing 19.1%) and 3,717,270 high-speed Internet subscribers, up 9% year over year. In the first quarter, Bell Wireline added a net of 14,989 high-speed Internet customers and 22,402 Fibe TV customers, but lost 36,065 satellite TV subscribers.

Bell Media: Bell Media generated quarterly revenues of approximately $567.3 million, rising 1.3% year over year.

Guidance

BCE renewed financial guidance for 2017. The company expects adjusted earnings per share of C$3.30–C$3.40 while free cash flow growth is likely to be around 5% - 10%. Annual dividend per share is projected at C$2.87, reflecting a dividend pay-out policy of 65% – 75%. Revenue growth is expected to be around 4% – 6%, while EBITDA growth is also estimated at roughly 4% - 6%. Capital intensity projection is pegged at approximately 17%.

Zacks Rank

BCE contends with its peers Rogers Communications Inc. (NYSE:RCI) , Shaw Communications Inc. (NYSE:SJR) and TELUS Corp. (NYSE:TU) in the highly competitive Canadian telecom market. All four stocks currently carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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