BCE Still Evenly Poised

On January 10, we maintained our Neutral recommendation on BCE Inc (BCE - Analyst Report) based on its unparalleled asset base along with a broad collection of product offerings. The stock holds a Zacks Rank #3 (Hold), which further supports our view.

Why the Reiteration?

We expect the Canadian communications service provider BCE to benefit from higher wireless revenue, improving wireline revenue, growing contribution from media business and cost reduction methods. The company is enhancing its wireline and wireless video capabilities with significant new investments in broadband networks, which are expected to generate higher revenue per user and attract new customers.

The company’s Bell Media segment is also performing better than expected with the rapid growth in video usage and the media advertising demand. Further, acquisitions will continue to play an important role in boosting BCE’s overall portfolio. We also appreciate the company’s commitment to return value to its shareholders in the form of increased dividend and share repurchases.

Despite these positive aspects, we remain on the sidelines as failure on the company’s part to achieve its targets will adversely affect its revenue and earnings. Moreover, stiff competition from national carriers, regulatory issues and continued decline in network access services keep us cautious on the stock.

We witnessed no earnings momentum over the last 30 days. The Zacks Consensus Estimates for the fourth quarter and full year 2012 are currently pegged at 68 cents and $3.21 per share, respectively. This reflects year-over-year increase of 7.4% and 1.8% for the quarter and full year.

Other Stocks to Consider

Other stocks, within the diversified commutations service segment, worth considering are Hawaiian Telcom Holdco Inc (HCOM - Snapshot Report) and Shenandoah Telecommunications Co. (SHEN - Snapshot Report). Both of them carry Zacks Rank #2 (Buy).