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Why BCE Inc. (BCE) is Set to Beat Estimates in Q4 Earnings

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BCE Inc. (BCE - Free Report) is scheduled to release fourth-quarter 2017 results before the opening bell on Feb 8.

The company’s bottom line met the Zacks Consensus Estimate in two of the previous four quarters, while it missed on the other two, with an average miss of 0.09%.

Let’s see how things are shaping up prior to this announcement.

Why a Likely Positive Surprise?

Our proven model shows that BCE is likely to beat estimates because it has the right combination of the two key elements.

Zacks ESP: BCE has an Earnings ESP of +1.70%. This is because the Most Accurate estimate stands at 60 cents while the Zacks Consensus Estimate is pegged lower at 59 cents. This is a meaningful indicator of a likely positive earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: BCE has a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating estimates. Conversely, Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.

The combination of BCE’s favorable Zacks Rank and positive ESP makes us confident of an earnings beat at the company.

What is Driving the Better-Than-Expected Earnings?

We are impressed with BCE’s innovative network expansion methodologies which have helped it to substantially add subscribers and compete against market behemoths like Rogers Communications Inc. (RCI - Free Report) , Shaw Communications Inc. (SJR - Free Report) and TELUS Corp. (TU - Free Report) in the Canadian integrated telecom market.

BCE is Canada’s leading communications service provider and serves as the holding company for Bell Canada. The company provides local and long-distance phone service to approximately 70% of the Canadian population, primarily in Ontario and Quebec.

BCE provides wireless service, data communications, telephone, high-speed Internet, direct-to-home (DTH) satellite television and Voice over Internet Protocol (VoIP) services. Bell Canada also offers integrated information and communications technology (ICT) services to businesses and governments, and is the Virtual Chief Information Officer (VCIO) to small and medium businesses (SMBs).

BCE will benefit from robust activities in the wireless business, strong subscriber addition, decline in churn rates and its focus on technology upgrades. The company continues to focus on six strategic areas including investment in broadband network and services, accelerating wireless services, leveraging wireline momentum, expanding media coverage, improving customer service and achieving a competitive cost structure. These initiatives are expected to generate higher revenues per user and attract new customers.

Moreover, with the completion of the MTS deal, Bell Canada gained almost 710,000 wireless, Internet and IPTV customers in Manitoba, a 5% increase in total broadband service subscribers positioning it as one of the largest mobile provider in Manitoba with more than 470,000 total Bell and MTS wireless subscribers.

On the flip side, the wireline segment continues to witness a decline in revenues. In third-quarter 2017, 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.

Moreover, the company’s local line access for traditional telephony service continues to decline among large customers due to higher wireless substitution and migration to IP-based services. This is reflected by persistent erosion in overall network access services on a year-over-year basis, hurting revenues of the local and long-distance operations.

Buoyed by such headwinds, BCE’s shares have lost 2.79% over the past six months. However, the stock price performance was better than the industry’s decline of 6.88%.


BCE, Inc. Price and EPS Surprise

BCE, Inc. Price and EPS Surprise | BCE, Inc. Quote

Key Pick

Windstream Holdings Inc. (WIN - Free Report) has the right combination of elements to deliver an earnings beat when it reports fourth-quarter 2017 results on Feb 22. Windstream has an Earnings ESP of +16.79% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

For Windstream, the Zacks Consensus Estimate for fourth-quarter 2017 loss per share is currently pegged at 39 cents, indicating year-over-year improvement of 23.53%. Similarly, the Zacks Consensus Estimate for fourth-quarter 2017 revenues stands at $1.49 billion, reflecting a year-over-year increase of 13.70%.

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