Telefonica (TEF) Beats Earnings & Revenues Estimates In Q3

Spanish telecom giant Telefonica (MC:TEF) S.A. (NYSE:T) reported strong financial results in the third quarter of 2016.

Quarterly net income increased 38.5% year over year to €983 million (approximately $1,097 million). Moreover, third-quarter earnings per ADR (American Depository Receipt) came in at 21 cents, up 75% year over year. Also, earnings beat the Zacks Consensus Estimate of 12 cents.

Telefonica recorded total revenue of €13,080 million (roughly $14,595 million) in the third quarter, down 5.9% year over year but above the Zacks Consensus Estimate of $14,577 million.

Operating income before depreciation and amortization (OIBDA) came in at €4,175 million ($4,659 million), down 1% on a reported basis but up 3.1% on an organic basis. Quarterly OIBDA margin was 31.9% compared with 30.3% in the year-ago quarter. Operating income declined 5.5% on a reported basis and 0.4% on organic basis to €1,718 million ($1,917 million).

Segmental Detail

Telefonica Latin America: Revenues in Brazil increased 7.9% on a reported basis and 1.1% on an organic basis to €2,952million ($3,294.4 million). Meanwhile in the Hispano-American markets, revenues fell 13.9% on a reported basis but improved 4.1% on an organic basis to €3,129 million ($3,492 million). OIBDA margin in Brazil and the Hispano-American markets was 33.3% and 31% in comparison to the year-ago figures of 30.4% and 29.7%, respectively. In Brazil, Telefonica operates through its subsidiary Telefonica Brasil SA (NYSE:VIV) .

Telefonica Europe: In Spain, revenues decreased 0.4% on a reported basis and declined 0.4% on an organic basis to €3,169 million (approximately $3,615.1 million). OIBDA margin in Spain was 43.3% compared with 43.2% in the year-ago quarter. Revenues from Telefonica Deutschland were down 5.2% on both a reported and organic basis to €1,876 million ($2,070.5 million).

Subscriber Statistics

As of Sep 30, 2016, total customer access lines were approximately 349.413 million, down 0.9% year over year. Notably, in the Latin American markets, Telefonica competes with large global telecom operators like AT&T, Inc. (NYSE:T) and America Movil S.A.B. de C.V. (NYSE:AMX) .

On a year-over-year basis, mobile access decreased 0.6% to 274.883 million customers. Total Internet and data access grew 1.4% to 21.738 million users. Pay-TV access totaled 8.422 million, up 3% year over year. LTE customer count was 57.342 million, up an astounding 89.8% year over year, representing 20% of total mobile accesses. Fiber and VDSL access was 8.705 million, up a substantial 25.5% year over year. Broadband access was 21.266 million, up 1.4% year over year.

Liquidity and Cash Flow

Telefonica exited the third quarter of 2016 with total debt of about €61,171 million (about $68,267 million), up from €60,087 million ($67,057 million) recorded at the end of 2015. Telefonica ended the reported quarter with cash and cash equivalents of €3154 million (around $3,159 million) compared with €2,615 million (roughly $2,198 million) at 2015-end.

In the first nine months of 2016, Telefonica generated €9,302 million (around $10,381 million) of cash from operations, up 0.4% year over year. Free cash flow in the reported period was €2,071 million (approximately $2,311 million).

Telefonica currently carries 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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