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Telefonica (TEF) Slips to Loss in Q4, Revenues Fall Y/Y
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Telefonica (TEF - Free Report) reported fourth-quarter 2021 net loss of €1,198 million ($1,439.5 million), plunging 231.5% year on year. Net loss per share came in at €0.22 (26 cents) against the profit of €0.15 per share reported in the year-ago quarter. Further, adjusted earnings per share came in at €0.07 (8 cents) compared with €0.17 (21 cents) in the prior-year quarter.
This Spain-based telecom giant’s shares fell 1.69% in yesterday’s trading session to close at $4.65.
Nonetheless, in 2021, net income skyrocketed 414.34% year over year to €8,137 million or €1.38 per share. The drastic year-over-year improvement was primarily driven by the acquisition of Oi mobile asset in Brazil, the Telxius Tower sale, the Virgin Media-O2 joint venture’s solid performance in the U.K., accretive customer base, growth investments, debt-reduction initiatives and streamlined operations along with the delivery of inclusive connectivity. This outperformance occurred despite the restructuring provision of €1.4 billion in OIBDA (operating income before depreciation and amortization),mainly in Spain and impairment in Peru recorded in the last quarter of 2021.
Quarterly total revenues declined 11.4% year over year to €9,674 million ($11,624.3 million). However, the top line surpassed the consensus estimate of $10,622 million. Moreover,organic revenues grew 3.1% year over year.
In 2021, revenues slid 8.8% year over year to €39,277 million. However, organic revenues moved up 2% year over year.
Results by Business Units
Telefonica Espana: Quarterly revenues in Spain inched up 0.5% year over year on a reported basis to €3,207 million. Launching the new Fusion Digital Pymes, a digitalization solution and solid handset sales acted as tailwinds. Quarterly OIBDA margin declined to 38% from 41.1% in the year-ago quarter. Capital expenditures (CapEx) increased 16.9% to €449 million during the quarter.
Telefonica Deutschland: Quarterly revenues rose 1.6% to €2,055 million. The improvement was driven by healthy traction in the Mobile business and robust demand for high-value handsets as well as the success of the O2 brand. Quarterly OIBDA margin was 30.6% compared with 31.5% in the year-ago quarter, reflecting operating inefficiencies. CapEx rose 28.8% to €474 million during the quarter.
VirginMedia-O2 U.K.: Quarterly revenues of this newly formed segment increased 5.5% to €3,196 million, fueled by improving mobile trends. Solid handset revenues and accretive customer base boosted the segment’s performance in the quarter. However, it was partly offset by soft B2B revenues. Quarterly OIBDA margin declined to 32.4% from 33.6% in the prior-year quarter. CapEx increased 18.2% to €726 million during the quarter.
Telefonica Brasil: Quarterly revenues in Brazil grew 3.1% to €1,802 million, mainly due to the strong performance of handset revenues in fourth-quarter 2021. Quarterly OIBDA margin decreased to 45.1% from 45.9% in the prior-year quarter. CapEx jumped 60.6% to €1,067 million during the quarter on the back of investments related to enhancing the coverage of mobile and fiber-to-the-home networks.
Telefonica Infra (Telxius): The segment performed well on the back of its solid global infrastructure through the Derio Communications Hub with new customer additions. The segment is focused on expanding its fiber-to-the-home footprint and improving Telxius' cable assets. Further, the acquisition of Fiberty 1 by FiBrasil acted as a major tailwind. The sale of 4,080 sites by Telxiusto American Tower Corporation (“ATC”) for a total price of €0.6 billion was the segment’s main transaction for 2021, which significantly aided Telefonica to reduce its heavy debt burden. This has driven the creation of fiber vehicles in Germany and Brazil, generating growth opportunities. Strength in infrastructure assets and co-investments is expected to enable the segment to tap lucrative opportunities in the long run.
Telefonica Tech: This sustainable focused, fast-growing technology company delivered superior revenue growth throughout 2021. Revenues came in at €994 million in 2021,driven by improving organic trends and further enhanced by M&A operations in2021. This segment showcased an impressive performance supported by accelerated growth in Cybersecurity & Cloud Tech revenues. The unit witnessed a steady pace of growth as businesses migrated toward digitization.
Telefonica Hispam: Quarterly revenues in this segment rose18.6% to €2,293 million, mainly buoyed by growth across all countries, except for Mexico. Quarterly OIBDA margin came in at 3.4% compared with24.4% in the prior-year quarter. CapEx was up 47.3% to €324 million during the quarter.
Other Details
Quarterly OIBDA came in at €1,363 million, down 63.7% year over year. OIBDA margin was 14.1% compared with 34.4% in the year-ago quarter. Operating loss came in at €740 million in the December-end quarter against the operating income of €1,471 million recorded in the last-year quarter.
During the reported quarter, the company announced that a new unit was being launched jointly by Telefonica Spain and Telefonica Infrastructure. The new FiberCo will seek to expand to 5 million new locations, with focus on low-density areas of the country.
Cash Flow & Liquidity
In 2021, Telefonica generated €10,268 million of net cash from operating activities compared with €13,196 million a year ago. Free cash flow for the same period totaled €2,648 million, which included leases principal payments.
As of Dec 31, 2021, the company had €8,580 million ($9,721.1 million) in cash and cash equivalents with €35,290 million ($39,983.6 million) of non-current financial liabilities.
2022 Outlook
Encouraged by an optimistic performance in 2021, Telefonica has set new 2022 financial targets. The company expects to achieve low single-digit organic growth in revenues and OIBDA as well as a CapEx to sales ratio of up to 15%.
In addition, the company has announced a dividend of €0.30 in cash per share for 2022, payable in December 2022 and June 2023. The company also announced the cancellation of the shares representing 2.41% of the share capital held as treasury stock.
Conversion rate used:
€1 = $1.2016 (period average from Oct 1, 2021 to Dec 31, 2021)
Progress Software has a projected earnings growth rate of 3.62% for fiscal 2022. The Zacks Consensus Estimate for Progress Software’s fiscal 2022 earnings has been revised upward by 6 cents in the past 60 days. The long-term earnings growth rate of the company is pegged at 2%.
Progress Software’s earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 26.8%. Shares of PRGS have lost 0.9% in the past year.
Badger Meter has a projected earnings growth rate of 5.77% for 2022. The Zacks Consensus Estimate for Badger Meter’s 2022 earnings has been revised upward by 19 cents in the past 60 days.
Badger Meter’s earnings beat the Zacks Consensus Estimate in three of the last four quarters and met estimates once, the average surprise being 14%. Shares of BMI have dropped 6.8% in the past year.
Cadence has a projected earnings growth rate of 7.9% for 2022. The Zacks Consensus Estimate for Cadence’s 2022 earnings has been unchanged in the past 90 days. The long-term earnings growth rate of the company is pegged at 18.2%.
Cadence’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 9.66%. Shares of CDNS have rallied 8% in the past year.
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Telefonica (TEF) Slips to Loss in Q4, Revenues Fall Y/Y
Telefonica (TEF - Free Report) reported fourth-quarter 2021 net loss of €1,198 million ($1,439.5 million), plunging 231.5% year on year. Net loss per share came in at €0.22 (26 cents) against the profit of €0.15 per share reported in the year-ago quarter. Further, adjusted earnings per share came in at €0.07 (8 cents) compared with €0.17 (21 cents) in the prior-year quarter.
This Spain-based telecom giant’s shares fell 1.69% in yesterday’s trading session to close at $4.65.
Nonetheless, in 2021, net income skyrocketed 414.34% year over year to €8,137 million or €1.38 per share. The drastic year-over-year improvement was primarily driven by the acquisition of Oi mobile asset in Brazil, the Telxius Tower sale, the Virgin Media-O2 joint venture’s solid performance in the U.K., accretive customer base, growth investments, debt-reduction initiatives and streamlined operations along with the delivery of inclusive connectivity. This outperformance occurred despite the restructuring provision of €1.4 billion in OIBDA (operating income before depreciation and amortization),mainly in Spain and impairment in Peru recorded in the last quarter of 2021.
Telefonica SA Price, Consensus and EPS Surprise
Telefonica SA price-consensus-eps-surprise-chart | Telefonica SA Quote
Revenues
Quarterly total revenues declined 11.4% year over year to €9,674 million ($11,624.3 million). However, the top line surpassed the consensus estimate of $10,622 million. Moreover,organic revenues grew 3.1% year over year.
In 2021, revenues slid 8.8% year over year to €39,277 million. However, organic revenues moved up 2% year over year.
Results by Business Units
Telefonica Espana: Quarterly revenues in Spain inched up 0.5% year over year on a reported basis to €3,207 million. Launching the new Fusion Digital Pymes, a digitalization solution and solid handset sales acted as tailwinds. Quarterly OIBDA margin declined to 38% from 41.1% in the year-ago quarter. Capital expenditures (CapEx) increased 16.9% to €449 million during the quarter.
Telefonica Deutschland: Quarterly revenues rose 1.6% to €2,055 million. The improvement was driven by healthy traction in the Mobile business and robust demand for high-value handsets as well as the success of the O2 brand. Quarterly OIBDA margin was 30.6% compared with 31.5% in the year-ago quarter, reflecting operating inefficiencies. CapEx rose 28.8% to €474 million during the quarter.
VirginMedia-O2 U.K.: Quarterly revenues of this newly formed segment increased 5.5% to €3,196 million, fueled by improving mobile trends. Solid handset revenues and accretive customer base boosted the segment’s performance in the quarter. However, it was partly offset by soft B2B revenues. Quarterly OIBDA margin declined to 32.4% from 33.6% in the prior-year quarter. CapEx increased 18.2% to €726 million during the quarter.
Telefonica Brasil: Quarterly revenues in Brazil grew 3.1% to €1,802 million, mainly due to the strong performance of handset revenues in fourth-quarter 2021. Quarterly OIBDA margin decreased to 45.1% from 45.9% in the prior-year quarter. CapEx jumped 60.6% to €1,067 million during the quarter on the back of investments related to enhancing the coverage of mobile and fiber-to-the-home networks.
Telefonica Infra (Telxius): The segment performed well on the back of its solid global infrastructure through the Derio Communications Hub with new customer additions. The segment is focused on expanding its fiber-to-the-home footprint and improving Telxius' cable assets. Further, the acquisition of Fiberty 1 by FiBrasil acted as a major tailwind. The sale of 4,080 sites by Telxiusto American Tower Corporation (“ATC”) for a total price of €0.6 billion was the segment’s main transaction for 2021, which significantly aided Telefonica to reduce its heavy debt burden. This has driven the creation of fiber vehicles in Germany and Brazil, generating growth opportunities. Strength in infrastructure assets and co-investments is expected to enable the segment to tap lucrative opportunities in the long run.
Telefonica Tech: This sustainable focused, fast-growing technology company delivered superior revenue growth throughout 2021. Revenues came in at €994 million in 2021,driven by improving organic trends and further enhanced by M&A operations in2021. This segment showcased an impressive performance supported by accelerated growth in Cybersecurity & Cloud Tech revenues. The unit witnessed a steady pace of growth as businesses migrated toward digitization.
Telefonica Hispam: Quarterly revenues in this segment rose18.6% to €2,293 million, mainly buoyed by growth across all countries, except for Mexico. Quarterly OIBDA margin came in at 3.4% compared with24.4% in the prior-year quarter. CapEx was up 47.3% to €324 million during the quarter.
Other Details
Quarterly OIBDA came in at €1,363 million, down 63.7% year over year. OIBDA margin was 14.1% compared with 34.4% in the year-ago quarter. Operating loss came in at €740 million in the December-end quarter against the operating income of €1,471 million recorded in the last-year quarter.
During the reported quarter, the company announced that a new unit was being launched jointly by Telefonica Spain and Telefonica Infrastructure. The new FiberCo will seek to expand to 5 million new locations, with focus on low-density areas of the country.
Cash Flow & Liquidity
In 2021, Telefonica generated €10,268 million of net cash from operating activities compared with €13,196 million a year ago. Free cash flow for the same period totaled €2,648 million, which included leases principal payments.
As of Dec 31, 2021, the company had €8,580 million ($9,721.1 million) in cash and cash equivalents with €35,290 million ($39,983.6 million) of non-current financial liabilities.
2022 Outlook
Encouraged by an optimistic performance in 2021, Telefonica has set new 2022 financial targets. The company expects to achieve low single-digit organic growth in revenues and OIBDA as well as a CapEx to sales ratio of up to 15%.
In addition, the company has announced a dividend of €0.30 in cash per share for 2022, payable in December 2022 and June 2023. The company also announced the cancellation of the shares representing 2.41% of the share capital held as treasury stock.
Conversion rate used:
€1 = $1.2016 (period average from Oct 1, 2021 to Dec 31, 2021)
€1 = $1.133 (as of Dec 31, 2021)
Zacks Rank & Key Picks
Telefonica currently has a Zacks Rank #4 (Sell).
Some better-ranked stocks from the broader technology space include Progress Software (PRGS - Free Report) , Badger Meter (BMI - Free Report) and Cadence Design Systems (CDNS - Free Report) . While Progress Software and Badger Meter sport a Zacks Rank #1 (Strong Buy), Cadence carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Progress Software has a projected earnings growth rate of 3.62% for fiscal 2022. The Zacks Consensus Estimate for Progress Software’s fiscal 2022 earnings has been revised upward by 6 cents in the past 60 days. The long-term earnings growth rate of the company is pegged at 2%.
Progress Software’s earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 26.8%. Shares of PRGS have lost 0.9% in the past year.
Badger Meter has a projected earnings growth rate of 5.77% for 2022. The Zacks Consensus Estimate for Badger Meter’s 2022 earnings has been revised upward by 19 cents in the past 60 days.
Badger Meter’s earnings beat the Zacks Consensus Estimate in three of the last four quarters and met estimates once, the average surprise being 14%. Shares of BMI have dropped 6.8% in the past year.
Cadence has a projected earnings growth rate of 7.9% for 2022. The Zacks Consensus Estimate for Cadence’s 2022 earnings has been unchanged in the past 90 days. The long-term earnings growth rate of the company is pegged at 18.2%.
Cadence’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 9.66%. Shares of CDNS have rallied 8% in the past year.