It has been about a month since the last earnings report for BCE, Inc. (BCE - Free Report) . Shares have added about 2.1% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
BCE Lags Q2 Earnings and Revenue Estimates
BCE Inc.'s quarterly net income was approximately $602.57 million, down 2.3% year over year. However, GAAP earnings per share were 84 cents, down 5.6% year over year. Adjusted net income per ADS (American Depository Share) came in at 65 cents, lagging the Zacks Consensus Estimate of 67 cents. The bottom line declined 1.52% on a year-over-year basis.
Total revenue was approximately $4,235.5 million, up 6.39% year over year but below the Zacks Consensus Estimate of $4,337.5 million. Adjusted EBITDA (earnings before interest, tax, depreciation and amortization) came in at about $1,769.08 million, increasing 4.9% year over year. Quarterly adjusted EBITDA margin was 41.8% compared with 42.5% in the prior-year quarter.
In the second quarter of 2017, BCE generated approximately $1,600.42 million of cash from operations, up 14% year-over-year. Free cash flow in the reported quarter was around $812.84 million versus $693.96 million in the year-ago quarter.
Segments in Detail
Bell Wireless: Revenues from Bell Wireless increased 12.9% year over year to $1,455.54 million. Services revenues climbed 12.8% to approximately $1,358.20 million. Product revenue was up 13.9% to $97.33 million. Blended average revenue per user increased 4.6% to $49.99. Postpaid customer churn decreased 0.07 % points in Q2 to 1.08%.
During the reported quarter, BCE added a net of 88,611 postpaid wireless subscribers, up 26.9% year over year. As of Jun 30, Bell Wireless postpaid customers totaled 8,126,264, up 8.8% year over year. Total wireless customers grew 7.5% to 8,901,291, which included a reduction of 104,833 postpaid customers in this quarter to reflect the divestiture of subscribers to Telus as part of BCE's MTS acquisition. The percentage of postpaid subscribers on LTE reached 85% in second-quarter 2017, up from 76% in the year-ago period.
Bell Wireline: Revenues from Bell Wireline service increased 4.8% year over year to approximately $2,318.90 million. Wireline data service revenue increased 6.7% to $1,335.91 million while Wireline product revenue decreased 0.8% to $176.83 million. Local and access revenue increased 4.1% to $604.06 million due to the incremental financial contribution of Bell MTS and residential rate increases. Long distance revenue decreased 8.7% to $124.08 million.
Total network access services (NAS) lines in second-quarter 2017, was 6,479,315, up slightly from 6,476,683 last year. Residential NAS losses during the reported quarter improved 2.3% to 67,005 from 68,593 in the prior-year quarter. Business NAS net losses increased to 27,954 from 20,232 in the year-ago period.
As of Jun 30, 2017, BCE had a total of 2,824,016 TV subscribers, up 2.7% compared to 2,750,596 in the year-ago quarter. At the end of the reported quarter, BCE served 1,481,434 IPTV subscribers, up 17.0% year over year. Satellite TV net customer losses improved 10.2% to 29,764 compared to last year. High-speed Internet customer base totaled 3,718,677, up 8.8% year-over-year. In the quarter under review, BCE added 16,427 net new Fibe TV subscribers in the second quarter, a decrease from 35,255 gained last year and 1,407 net additions of high-speed Internet , down from 7,539 in Q2 2016.
Additionally, 17,426 new net fiber-to-the-home (FTTH) Internet customers were added in the quarter
Bell Media: Bell Media generated quarterly revenues of $591.43 million, up 2.2% year-over-year, on higher advertising and subscriber revenues.
Common Share Dividend
BCE's Board of Directors has declared a quarterly dividend of $0.7175 per common share, payable on Oct 15, 2017 to shareholders of record at the closure of business on Sep 15, 2017.
Outlook for 2017
BCE confirmed its financial guidance for 2017, as updated on Apr 26, 2017 to reflect the acquisition of MTS. The company expects adjusted earnings per share of C$3.30–C$3.40 while free cash flow growth is likely to be around 5–10%. Annual dividend per share is projected at C$2.87, reflecting a dividend pay-out policy of 65–75%. Revenue growth is expected to be around 4–6%, while EBITDA growth is also estimated at roughly 4–6%. Capital intensity projection is pegged at approximately 17%.
How Have Estimates Been Moving Since Then?
Following the release and in the last month, investors have witnessed an upward trend in fresh estimates. There have been three revisions higher for the current quarter.
At this time, BCE's stock has an average Growth Score of C, however its Momentum is doing a lot better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is more suitable for momentum investors than those looking for value and growth.
Estimates have been trending upward for the stock. The magnitude of these revisions also looks promising. Notably, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.