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BCE Inc. (BCE) Q2 Earnings: Disappointment in the Cards?

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Leading Canadian telephone operator BCE Inc. (BCE - Free Report) is scheduled to report second-quarter 2016 results on Aug 4, before the opening bell.

Last quarter, the company posted a negative earnings surprise of 4.62%. However, the company’s earnings surpassed the Zacks Consensus Estimate in three of the previous four quarters, with an average beat of 4.01%. Let’s see how things are shaping up for this announcement.

BCE INC Price and EPS Surprise

BCE INC Price and EPS Surprise | BCE INC Quote

Factors Likely to Influence this Quarter

We are impressed with BCE’s strategic moves to enhance employee skills, increase capital investments and reduce expenditures. However, failure to execute any of these will impact the company’s financials and growth prospects. Stringent regulatory measures imposed by the Canadian regulators are a major concern. The company also witnessed decline in network access services lines.

BCE continues to invest in LTE, broadband and fiber to provide additional capacity on Internet and wireless networks. However, the company was unable to recover these costs from customers due to competitors’ short-term pricing of comparable services. Intense price competition is forcing prospective and existing customers to opt for discounted monthly rate plans offered by competitors.

Further, exposure to labor union issues covered by collective bargaining agreements leads to work disruptions and higher labor costs. Satellites used by Bell TV are subject to significant operational risks and construction and launch delays that could have an adverse effect on Bell TV’s business and financial results.

Nevertheless, increasing deployment of Gigabit Fibe coupled with efforts to enhance broadband fiber, 4G LTE mobile networks, upcoming 5G networks, IP phone services and post-paid business should help the company gain customers and also put a check on churn.

Earnings Whispers

Our proven model does not conclusively show that BCE is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here as elaborated below.

Zacks ESP: BCE has an earnings ESP of -4.23%. This is because the Most Accurate estimate is pegged at 68 cents and the Zacks Consensus Estimate stands at 71 cents.

Zacks Rank: BCE has a Zacks Rank #4 (Sell). Please note thatwe caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stocks to Consider

Here are some companies that you may consider instead as our model shows that they have the right combination of elements to post an earnings beat this quarter.

Facebook Inc. , with an earnings ESP of +2.63% and a Zacks Rank #1.

MKS Instruments Inc. (MKSI - Free Report) , with an earnings ESP of +2.60% and a Zacks Rank #1.

MeetMe Inc. , with an earnings ESP of +33.33% and a Zacks Rank #2.

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