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Telefonica's (TEF) Q2 Earnings Down, Revenues Inch Up Y/Y

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Telefonica, S.A. (TEF - Free Report) reported a second-quarter 2022 net income of €320 million, plunging 95.9% year over year. Further, basic earnings per share were €0.05 compared with €1.31 in the prior-year quarter.

Quarterly total revenues increased 0.8% year over year to €10,040 million. However, organic revenues (aggregating 50% of Virgin Media O2 joint venture results) grew 5.2% year over year to €11,519 million.

Telefonica SA Price, Consensus and EPS Surprise

Telefonica SA Price, Consensus and EPS Surprise

Telefonica SA price-consensus-eps-surprise-chart | Telefonica SA Quote

Results by Business Units

Telefonica Espana: Quarterly revenues in Spain increased 1.3% year over year on a reported basis to €3,085 million. This is due to growth in service revenues because of rising average revenue per user (APRU) and growth in handset sales. The quarterly OIBDA margin declined to 36.3% from 38% in the year-ago quarter. Capital expenditure (CapEx) decreased 10.1% to €347 million in the quarter.

Telefonica Deutschland: Quarterly revenues rose 5.8% to €2,003 million. The improvement was driven by core business strength and high customer demand for the O2 Free portfolio, which drove the contract mobile base. The quarterly OIBDA margin was 31.8% compared with 32.5% in the year-ago quarter, reflecting operating inefficiencies. CapEx rose 4.2% to €291 million in the quarter.

VirginMedia-O2 U.K.: Quarterly revenues of this newly formed segment increased 1.9% to €3,006 million, fueled by improving mobile trends. Solid mobile revenues and increasing price of mobile phones boosted the segment’s performance in the quarter. However, it was partly offset by soft B2B revenues. The quarterly OIBDA margin increased to 37.4% from 35.5% in the prior-year quarter. CapEx increased 22.8% to €665 million in the quarter.

Telefonica Brasil: Quarterly revenues in Brazil grew 34.9% to €2,257 million, mainly due to the fixed and service revenue growth. The quarterly OIBDA margin decreased to 40.3% from 46.5% in the prior-year quarter. CapEx jumped 37.7% to €485 million in the quarter.

Telefonica Infra (Telxius): The pandemic-induced boost in traffic and the emergence of the new digital era had already helped the company in previous years, still Telxius' traffic in the second quarter increased by 9% year over year. It is expected to receive the regulatory and competition approvals for the increased stake in Q4 2022.

Unsere Grüne Glasfaser has more than 380,000 buildings in Germany that are covered by MoUs with municipalities. In Brazil, FiBrasil is on track to accomplish its deployment goal, having exceeded 2.5 million premises in the second quarter.

Telefonica Tech: Revenues increased 64.8% year over year to €335 million, considerably above the market. This was driven by the robust performance throughout businesses and integration of operations in the last 12 months. The Cyber business unit is outperforming estimates, with year-to-date IoT revenues expanding in double digits.

Telefonica Hispam: Quarterly revenues in this segment rose 18.4% to €2,376 million, mainly buoyed by growth across all countries. The quarterly OIBDA margin was 20.9%, compared with 18.6% in the prior-year quarter. CapEx has increased 106.9% to €313 million in the quarter.

Other Details

Quarterly OIBDA was €3,146 million, down 76.6% year over year. Operating income was €919 million in the quarter under review compared with €11,353 million in the prior-year quarter. The downtick was caused due to capital gains booked in the second quarter of 2021.

Cash Flow & Liquidity

For six months ended Jun 30, 2022, Telefonica generated €4,739 million of net cash from operating activities compared with €5,112 million generated in the comparable period in the prior year. Free cash flow for the same period totaled €835 million, which includes principal payments of leases.

As of June 2022, the company had €6,385 million in cash and cash equivalents, with €34,914 million of non-current financial liabilities.

2022 Outlook

The company expects to achieve high-end of low-single-digit growth in revenues, mid to high-end of low-single-digit growth for OIBDA, and a CapEx-to-sales ratio of up to 15%.

In addition, the company announced a cash dividend of €0.30 per share for 2022, payable in December 2022 (€0.15 per share) and June 2023 (€0.15 per share). The company also announced the cancellation of shares worth €139 million as treasury stock.

Zacks Rank & Stocks to Consider

Telefonica currently has a Zacks Rank #3 (Hold).

Some better-ranked stocks from the broader technology space are Aspen Technology (AZPN - Free Report) , Synopsys (SNPS - Free Report) and InterDigital Inc. (IDCC - Free Report) . Aspen Technology, Synopsys and InterDigital each carry a Zacks Rank #2 (Buy).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Aspen Technology’s 2022 earnings is pegged at $5.49 per share, increasing 0.4% in the past 60 days. The long-term earnings growth rate is anticipated to be 16.3%.

Aspen Technology’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 4.1%. Shares of AZPN have soared 34.9% in the past year.

The Zacks Consensus Estimate for Synopsys 2022 earnings is pegged at $8.67 per share, unchanged in the past 60 days. The long-term earnings growth rate is anticipated to be 19.6%.

Synopsys earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 2.7%. Shares of SNPS have jumped 24.6% in the past year.

The Zacks Consensus Estimate for InterDigital’s 2022 earnings is pegged at $2.76 per share, declining 15.9% in the past 60 days. The long-term earnings growth rate is anticipated to be 15%.

InterDigital’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 141.1%. Shares of IDCC have declined 8.7% in the past year.


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