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Telefonica (TEF) Q2 Earnings Up Y/Y, Revenues Lag Estimates

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Spanish telecom giant, Telefonica S.A. (TEF - Free Report) , reported mixed financial results in the second quarter of 2017. The top line failed to meet the Zacks Consensus Estimate while the bottom line grew year over year. 

Quarterly net income was €821 million (approximately $902 million), up 18.4% year over year. Moreover, second-quarter earnings per ADR (American Depository Receipt) came in at 16 cents, up 6.7% year over year.

Telefonica recorded total revenue of €12,960 million (roughly $14,241 million) in the reported quarter, up 1.9% year over year. However, the figure missed the Zacks Consensus Estimate of $15,010 million.  

Operating income before depreciation and amortization (OIBDA) came in at €4,158 million ($4,569.6 million), up 6.1% year over year. Quarterly OIBDA margin was 32.1% compared with 30.8% in the year-ago quarter. Operating income was €1,800 million (around $1,978.2 million) in the reported quarter, up 14.9% year over year.

Segmental Detail

Telefonica Latin America:  Revenues in Brazil increased 14.1% on a reported basis and 1.8% on an organic basis to €3,028 million ($3,327.8 million). Meanwhile in the Hispano-American markets, revenues grew 5.9% on a reported basis and 15.5% on an organic basis to €3,134 million ($3,444.3 million). OIBDA margin in Brazil and the Hispano-American markets was 34.1% and 28.5% in comparison with the year-ago figures of 31.6% and 32.4%, respectively. In Brazil, Telefonica operates through its subsidiary Telefonica Brasil SA (VIV - Free Report) .

Telefonica Europe:  In Spain, revenues decreased 2% on a reported basis and 1.9% on an organic basis to €3,160 million (approximately $3,472.8 million). OIBDA margin was 40.6% compared with 40.4% in the year-ago quarter.

Revenues from Telefonica Deutschland dipped 3.4% to €1,771 million ($1,946.3 million) on both reported and organic bases. OIBDA margin was 26.1% compared with 24.7% in the year-ago quarter.

Revenues from Telefonica UK were down 6.2% on reported basis but up 2.6% on organic basis to €1,607 million ($1,766.1 million). OIBDA margin was 27% compared with 26.7% in the year-ago quarter.

Subscriber Statistics

As of Jun 30, 2017, total customer access lines were approximately 341.3473 million, down 0.2% year over year. Notably, in the Latin American markets, Telefonica competes with large global telecom operators like AT&T, Inc. (T - Free Report) and America Movil S.A.B. de C.V. (AMX - Free Report) .

On a year-over-year basis, mobile access increased 0.8% to 273.8866 million customers. Total internet and data access grew 0.3% to 21.6973 million users. Pay-TV access totaled 8.2749 million, down 1.7% year over year. LTE customer count was 81.6042 million, surging 63% year over year, and representing 31.5% of total mobile accesses. FTTx/cable access was 9.9605 million, up a substantial 18.9% year over year. Broadband access was 21.2404 million, inching up 0.2% year over year.

Liquidity and Cash Flow

Telefonica ended the second quarter of 2017 with cash and cash equivalents of €6,046 million (around $6,644.6 million) compared with €3,736 million (roughly $4,034.9 million) at the end of 2016. The company exited the reported quarter with a total debt of about €62,495 million (about $68,682 million) compared with €74,554 million ($80,518 million) recorded at the end of 2016.

In the first half of 2017, Telefonica generated €4,954 million (around $6,543.4 million) of cash from operations, up 10.4% year over year. Free cash flow in the reported period was €1,549 million (approximately $1,702.4 million), rallying 106.8% year over year.

Telefonica SA Price, Consensus and EPS Surprise

 

Telefonica SA Price, Consensus and EPS Surprise | Telefonica SA Quote

Outlook for 2017

Telefonica expects revenues to grow more than 1.5% year over year. OIBDA margin will expand 0.01% and capital expenditure will be around 16% of the total revenue.

Telefonica currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

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