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Why Is BCE (BCE) Up 5.1% Since Last Earnings Report?

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It has been about a month since the last earnings report for BCE (BCE - Free Report) . Shares have added about 5.1% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is BCE due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

BCE Surpasses Q3 Earnings Estimates on Higher Revenues

BCE reported healthy third-quarter 2018 results, wherein both the top line and the bottom line surpassed the respective Zacks Consensus Estimate.

Net Earnings

Quarterly net earnings increased 1.4% year over year to C$814 million or C$0.90 per share primarily driven by top-line growth.

Adjusted net earnings came in at C$861 million or C$0.96 per share ($658.7 million or 74 cents per share) compared with C$824 million or C$0.91 per share in the prior-year quarter. The bottom line beat the Zacks Consensus Estimate by 3 cents.

Revenues

Total operating revenues increased 3.2% year over year to C$5,877 million ($4,532 million), beating the Zacks Consensus Estimate of $4,496 million. The year-over-year improvement was primarily driven by an increase in service revenues.

Other Quarter Details

Adjusted EBITDA were C$2,457 million, up 2.2% year over year, however adjusted EBITDA margin declined to 41.8% from 42.2% in the prior-year quarter.

Segmental Performance

Operating revenues from Bell Wireless increased 5.9% year over year to C$2,182 million, driven by strong subscriber base growth and a greater proportion of postpaid users in the customer mix compared to last year as well as increased sales of higher value smartphones. Service revenues improved 2.5% year over year to C$1,630 million, reflecting continued subscriber base expansion including a higher proportion of postpaid customers. Product revenues increased 17.2% to C$552 million due to increased sales of higher-value smartphones.

Operating revenues from Bell Wireline increased 1.9% year over year to C$3,147 million. Service revenues were up 0.8% to C$2,938 million. Product revenues increased 20.1% to C$209 million. The year-over-year improvement was led by positive residential services revenue growth, driven by strong Internet and IPTV customer gains and higher household average revenue per user as well as improved Bell Business Markets performance from higher Internet Protocol broadband connectivity revenue and increased sales of professional services.

Bell Media generated revenues of C$731 million, up 1.1% year over year primarily driven by higher revenues from both advertising and subscriber fees.

Cash Flow

For the first nine months of 2018, BCE generated C$5,596 million of cash from operations compared with C$5,700 million in the year-ago period. Free cash flow for the first nine months of the year was C$2,545 million compared with C$2,766 million in the year-ago period.

Liquidity

As of Sep 30, 2018, BCE had cash and cash equivalents of C$826 million ($639.9 million) with long-term debt of C$19,584 million ($15,171 million).

2018 Outlook

BCE has reiterated its financial targets for 2018. The company expects revenues to grow between 2% and 4%. While adjusted EBITDA is expected to rise 2-4%, adjusted EPS is expected between C$3.45 and C$3.55. Free cash flow is expected to grow in the range of 3-7%.

C$1 = $0.765035 (Period average from Jul 1, 2018 to Sep 30, 2018)

C$1 = $0.774655 (As on Sep 30, 2018)

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

Currently, BCE has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, BCE has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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