We expect leading Canadian telephone operator, BCE, Inc. (BCE - Free Report) , to beat earnings when the company reports second-quarter financial numbers on Aug 3, 2017 before market opens.
Last quarter, the company’s earnings surpassed the Zacks Consensus Estimate by 1.54%. The company has outpaced estimates in two of the past four quarters, with an average earnings miss of 1.86%.
Let’s see how things are shaping up for this announcement.
Why a Likely Positive Surprise?
Our proven model shows that BCE is likely to beat earnings because it has the perfect combination of two key ingredients.
Zacks ESP: BCE has an Earnings ESP of +2.99%. This is because the Most Accurate estimate stands at 69 cents, higher than the Zacks Consensus Estimate of 67 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
A favorable Zacks ESP serves as a meaningful and leading indicator of a likely positive earnings surprise.
Zacks Rank: BCE currently holds a Zacks Rank #2 (Buy). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 or 3 (Hold) have a significantly higher chance of beating earnings estimates.
Conversely, we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
The combination of BCE’s Zacks Rank #2 and an Earnings ESP of +2.99% makes us reasonably confident of a positive earnings beat on Aug 3.
What is Driving the Better-than-Expected Earnings?
We are impressed with BCE’s efforts to strengthen itself in the field of advanced networks, Fibe TV and Fibe Internet services, and the hosting and cloud suite.
The company’s subsidiary, Bell Canada, continues to rule the Canadian broadband communications market through the launch of Home Hub 3000 WiFi services with Wireless 4K Whole Home PVR from Fibe TV. Increasing deployment of Gigabit Fibe, 4G LTE mobile networks, IP phone services and post-paid businesses have helped the company gain customers in its post-paid wireless business and put a check on subscriber loss.
BCE’s acquisition of Q9 Networks has strengthened its foothold in the cloud space. We further believe that significant investments in network coverage, customer retention, lucrative data plans and the launch of handsets along with the provision of net protection might have driven customer addition.
The buyout of Manitoba Telecom Services Inc. (MTS) has helped Bell Canada gain almost 710,000 wireless, internet and IPTV customers in Manitoba. This has lead to a 5% increase in total broadband service subscribers. It, in turn, has positioned Bell Canada as one of the largest mobile providers in Manitoba, with more than 470,000 total Bell and MTS wireless subscribers.
Over the past three months, the BCE stock has returned 4.6 % while the industry gained 4.7%.
However, stringent regulatory measures, decline in network access services lines, price competition, exposure to labour union issues, operational risks, and construction and launch delays are major risks. In the wireless segment, BCE competes against the likes of Rogers Communications Inc. and TELUS Corporation (TU - Free Report) as well as small regional carriers in Canada. In the wireline segment, it competes against Shaw Communications Inc. (SJR - Free Report) .
Another Stock to Consider
NewJersey Resources Corporation (NJR - Free Report) from the Zacks categorized broader Utilities sector has the right combination of elements to post an earnings beat when it expectedly reports second-quarter 2017 results on Aug 2. The company has an Earnings ESP of +700% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
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