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BCE Inc. (BCE - Free Report) reported mixed financial results in the third quarter of 2017, wherein the company’s bottom line surpassed the Zacks Consensus Estimate. However, the top line missed the same.
Quarterly net income was approximately $651.15 million, up 2.1% year over year. GAAP earnings were 86 cents, down 1.1% year over year. Adjusted net income per ADS (American Depository Share) was 70 cents, beating the Zacks Consensus Estimate of 67 cents. The bottom line was flat on a year-over-year basis.
Total revenues were approximately $4,528.2 million, up 9.2% year over year but nominally below the Zacks Consensus Estimate of $4,528.7 million. Adjusted EBITDA (earnings before interest, tax, depreciation and amortization) totaled approximately $1,885.7 million, up 5.8% year over year. Quarterly adjusted EBITDA margin was 41.7% compared with 41.4% in the prior-year quarter.
Cash Flow
In the quarter under review, BCE generated approximately $1,779.7 million of cash from operations, up 14.9% year over year. Free cash flow in the quarter was around $942.85 million versus $757.95 million in the year-ago quarter.
Segments in Detail
Bell Wireless: Total operating revenues grew 10.4% to $1,625.88 million. Service revenues increased 11.2% to $1,524.66 million. This reflects continued postpaid subscriber base growth and higher blended average revenue per user (ARPU). Product revenues remained unchanged compared with the year-ago quarter at $13.55 million despite increased customer transactions resulting from competitive promotional smartphone pricing.
Wireless adjusted EBITDA was up 9.4% to $694.19 million in the third quarter of 2017.
As of Sep 30, Bell Wireless postpaid customers totaled 8,243,446, up 8.8% from the year-ago quarter. Total wireless customers grew 7.5% to 9,008,273. Postpaid net additions in the third quarter increased 9.2% to 117,182.
Blended ARPU grew 3% to $55.61 as a result of a higher year-over-year postpaid subscriber mix, increased LTE data usage and growth in subscribers on higher value rate plans with larger data thresholds in the overall revenue mix. Bell Wireless’ LTE customers consumed 26% more data per month in the third quarter compared with the year-ago period. The percentage of postpaid subscribers on LTE reached 86% in the quarter under review, up from 78% in the year-ago period. Postpaid customer churn improved 0.10% to 1.16%.
Bell Wireline: Revenues from Bell Wireline increased 2.9% year over year to approximately $2,464.32 million. Wireline data service revenues increased 6% to $1,439.38 million due to the favorable impact of Bell MTS, Internet and TV-subscriber base growth. Wireline product revenues declined 9.7% to $184.90 million, reflecting lower demand for telecommunications equipment by large enterprise business and wholesale customers due to competitive pricing and technology substitution. Local and access revenues increased 3.9% to $634.41 million due to the incremental financial contribution of Bell MTS and residential-rate increases. Long distance revenues declined 17.5% to $124.33 million as a result of ongoing NAS access line erosion.
Wireline adjusted EBITDA growth accelerated this quarter, up 4.4% year over year to $1,042.48 million. Operating costs were up 1.8% to $1,421.85 million, mainly due to the acquisitions of MTS and Q9. Excluding regulatory impacts, wireline adjusted EBITDA was up 6.1% in the quarter.
Total network access services (NAS) lines in third-quarter 2017 totaled 6,394,553, up 0.6% from 6,358,362 last year. Residential NAS net loss improved 28.8% to 57,387 from 80,587 in the prior-year quarter due to solid recovery of Fibe TV service bundle activations in the quarter. Business NAS net loss was down 27.5% to 27,375 from 37,734 in the third quarter of last year.
At the end of third-quarter 2017, BCE had 2,825,754 TV subscribers, up 2.9% compared with 2,745,873 in the year-ago quarter. At the end of the reported quarter, BCE served 1,517,833 IPTV subscribers, up 16.6% from the prior-year quarter. Bell TV gained 36,399 net new IPTV subscribers in the quarter under review, up slightly from the 36,253 last year despite sustained aggressive cable service bundle offers, increasing maturity of current Fibe TV markets and over-the-top substitution.
Satellite TV net customer loss improved 15.4% from last year to 34,661 due to fewer customer deactivations. As of Sep 30, BCE's high-speed Internet customer base totaled 3,763,101, up 8.8% from last year. High-speed Internet net subscriber additions totaled 44,424, up 12.8% from 39,375 a year ago.
Bell Wireline’s direct fibre footprint expanded to approximately 3.6 million homes and commercial locations in the said quarter from 2.8 million at the end of the prior-year quarter.
Bell Media: Bell Media generated quarterly revenues of $576.23 million, up 1% year over year, on higher advertising and subscriber revenues.
Common Share Dividend
BCE's board of directors declared a quarterly dividend of $0.7175 per common share, payable on Jan 15, 2018, to shareholders of record at the closure of business as of Dec 15, 2017.
Outlook for 2017
BCE confirmed financial guidance for 2017, as updated on Apr 26. The company expects adjusted earnings per share of C$3.30-C$3.40. 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 at around 4-6%, while EBITDA growth is also estimated at roughly 4-6%. Capital intensity projection is pegged at approximately 17%.
BCE’s strategic moves to enhance employee skills, increase capital investments and reduce expenditures look impressive. Failure to implement these initiatives might have an adverse impact on the company’s financials and prospects, thereby leading to lower profitability and revenues. Moreover, BCE continues to face tough competition from peers Rogers Communications Inc. (RCI - Free Report) , Shaw Communications Inc. and TELUS Corp. (TU - Free Report) in the highly competitive Canadian telecom market.
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BCE Tops Q3 Earnings & Lags Revenue Estimates, View Intact
BCE Inc. (BCE - Free Report) reported mixed financial results in the third quarter of 2017, wherein the company’s bottom line surpassed the Zacks Consensus Estimate. However, the top line missed the same.
Quarterly net income was approximately $651.15 million, up 2.1% year over year. GAAP earnings were 86 cents, down 1.1% year over year. Adjusted net income per ADS (American Depository Share) was 70 cents, beating the Zacks Consensus Estimate of 67 cents. The bottom line was flat on a year-over-year basis.
BCE, Inc. Price, Consensus and EPS Surprise
BCE, Inc. Price, Consensus and EPS Surprise | BCE, Inc. Quote
Total revenues were approximately $4,528.2 million, up 9.2% year over year but nominally below the Zacks Consensus Estimate of $4,528.7 million. Adjusted EBITDA (earnings before interest, tax, depreciation and amortization) totaled approximately $1,885.7 million, up 5.8% year over year. Quarterly adjusted EBITDA margin was 41.7% compared with 41.4% in the prior-year quarter.
Cash Flow
In the quarter under review, BCE generated approximately $1,779.7 million of cash from operations, up 14.9% year over year. Free cash flow in the quarter was around $942.85 million versus $757.95 million in the year-ago quarter.
Segments in Detail
Bell Wireless: Total operating revenues grew 10.4% to $1,625.88 million. Service revenues increased 11.2% to $1,524.66 million. This reflects continued postpaid subscriber base growth and higher blended average revenue per user (ARPU). Product revenues remained unchanged compared with the year-ago quarter at $13.55 million despite increased customer transactions resulting from competitive promotional smartphone pricing.
Wireless adjusted EBITDA was up 9.4% to $694.19 million in the third quarter of 2017.
As of Sep 30, Bell Wireless postpaid customers totaled 8,243,446, up 8.8% from the year-ago quarter. Total wireless customers grew 7.5% to 9,008,273. Postpaid net additions in the third quarter increased 9.2% to 117,182.
Blended ARPU grew 3% to $55.61 as a result of a higher year-over-year postpaid subscriber mix, increased LTE data usage and growth in subscribers on higher value rate plans with larger data thresholds in the overall revenue mix. Bell Wireless’ LTE customers consumed 26% more data per month in the third quarter compared with the year-ago period. The percentage of postpaid subscribers on LTE reached 86% in the quarter under review, up from 78% in the year-ago period. Postpaid customer churn improved 0.10% to 1.16%.
Bell Wireline: Revenues from Bell Wireline increased 2.9% year over year to approximately $2,464.32 million. Wireline data service revenues increased 6% to $1,439.38 million due to the favorable impact of Bell MTS, Internet and TV-subscriber base growth. Wireline product revenues declined 9.7% to $184.90 million, reflecting lower demand for telecommunications equipment by large enterprise business and wholesale customers due to competitive pricing and technology substitution. Local and access revenues increased 3.9% to $634.41 million due to the incremental financial contribution of Bell MTS and residential-rate increases. Long distance revenues declined 17.5% to $124.33 million as a result of ongoing NAS access line erosion.
Wireline adjusted EBITDA growth accelerated this quarter, up 4.4% year over year to $1,042.48 million. Operating costs were up 1.8% to $1,421.85 million, mainly due to the acquisitions of MTS and Q9. Excluding regulatory impacts, wireline adjusted EBITDA was up 6.1% in the quarter.
Total network access services (NAS) lines in third-quarter 2017 totaled 6,394,553, up 0.6% from 6,358,362 last year. Residential NAS net loss improved 28.8% to 57,387 from 80,587 in the prior-year quarter due to solid recovery of Fibe TV service bundle activations in the quarter. Business NAS net loss was down 27.5% to 27,375 from 37,734 in the third quarter of last year.
At the end of third-quarter 2017, BCE had 2,825,754 TV subscribers, up 2.9% compared with 2,745,873 in the year-ago quarter. At the end of the reported quarter, BCE served 1,517,833 IPTV subscribers, up 16.6% from the prior-year quarter. Bell TV gained 36,399 net new IPTV subscribers in the quarter under review, up slightly from the 36,253 last year despite sustained aggressive cable service bundle offers, increasing maturity of current Fibe TV markets and over-the-top substitution.
Satellite TV net customer loss improved 15.4% from last year to 34,661 due to fewer customer deactivations. As of Sep 30, BCE's high-speed Internet customer base totaled 3,763,101, up 8.8% from last year. High-speed Internet net subscriber additions totaled 44,424, up 12.8% from 39,375 a year ago.
Bell Wireline’s direct fibre footprint expanded to approximately 3.6 million homes and commercial locations in the said quarter from 2.8 million at the end of the prior-year quarter.
Bell Media: Bell Media generated quarterly revenues of $576.23 million, up 1% year over year, on higher advertising and subscriber revenues.
Common Share Dividend
BCE's board of directors declared a quarterly dividend of $0.7175 per common share, payable on Jan 15, 2018, to shareholders of record at the closure of business as of Dec 15, 2017.
Outlook for 2017
BCE confirmed financial guidance for 2017, as updated on Apr 26. The company expects adjusted earnings per share of C$3.30-C$3.40. 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 at around 4-6%, while EBITDA growth is also estimated at roughly 4-6%. Capital intensity projection is pegged at approximately 17%.
Zacks Rank
BCE currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Our Take
BCE’s strategic moves to enhance employee skills, increase capital investments and reduce expenditures look impressive. Failure to implement these initiatives might have an adverse impact on the company’s financials and prospects, thereby leading to lower profitability and revenues. Moreover, BCE continues to face tough competition from peers Rogers Communications Inc. (RCI - Free Report) , Shaw Communications Inc. and TELUS Corp. (TU - Free Report) in the highly competitive Canadian telecom market.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
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