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BCE Surpasses Q4 Earnings Estimates on Higher Y/Y Revenues

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BCE Inc. (BCE - Free Report) reported healthy fourth-quarter 2018 financial results, wherein both the top line and the bottom line surpassed the respective Zacks Consensus Estimate.

Net Earnings

Quarterly net earnings decreased 7.6% year over year to C$606 million ($458.5 million) or C$0.68 (51 cents) per share due to higher depreciation and amortization, interest, severance, acquisition and other costs. For full-year 2018, net earnings were C$2,785 million or C$3.10 per share compared with C$2,866 million or C$3.20 per share in 2017.

Quarterly adjusted net earnings came in at C$794 million or C$0.89 per share ($600.8 million or 67 cents per share) compared with C$736 million or C$0.82 per share in the prior-year quarter. The bottom line beat the Zacks Consensus Estimate by 1 cent.

BCE, Inc. Price, Consensus and EPS Surprise


The Canadian telecommunications company’s quarterly operating revenues increased 3% year over year to C$6,215 million ($4,703 million), beating the consensus estimate of $4,673 million. The rise was driven by gains in broadband wireless, Internet, TV and streaming customers. For full-year 2018, operating revenues increased 3.1% to C$23,468 million.

Other Quarterly Details

Adjusted EBITDA was C$2,394 million, up 2.8%, driven by year-over-year increase of 5.1% at Bell Wireless, 1.3% at Bell Wireline and 2.9% at Bell Media. However adjusted EBITDA margin slightly declined to 38.5% from 38.6% due to strong growth in lower-margin wireline and wireless product revenues.

Segmental Performance

Operating revenues from Bell Wireless increased 4.6% year over year to C$2,248 million ($1,700.9 million). Service revenues improved 2.2% to C$1,590 million, reflecting healthy subscriber base expansion. Product revenues increased 11% to C$658 million due to increased sales of higher-value smartphones.

Operating revenues from Bell Wireline increased 2.4% year over year to C$3,296 million ($2,493.8 million), reflecting top-line growth across Bell’s residential, business and wholesale units. Service revenues were up 1.5% to C$2,970 million, driven by growth in Internet and IPTV subscriber base, higher household ARPU, improved Bell Business Markets performance from IP broadband connectivity and business services revenue growth, and higher sales of international wholesale long distance minutes.

Product revenues increased 12% to C$326 million. The year-over-year improvement was led by strong data product sales to large enterprise business customers and higher sales of consumer electronics.

Bell Media generated revenues of C$850 million ($643.1 million), up 1.9% year over year on the back of advertising revenue growth in entertainment and sports specialty TV, conventional TV, outdoor advertising and digital media.

Cash Flow and Liquidity

During full-year 2018, BCE generated C$7,384 million of cash from operations compared with C$7,358 million in 2017. Free cash flow for the year was C$3,567 million compared with C$3,418 million in 2017.

As of Dec 31, 2018, the company had C$425 million ($311.8 million) of cash and cash equivalents with C$19,760 million ($14,494.9 million) of long-term debt compared with the respective tallies of C$625 million and C$18,215 million a year ago.

BCE’s board of directors declared a quarterly dividend of $0.7925 per share, payable Apr 15 to shareholders of record as on Mar 15. The company also announced 5% (15 cents per share) increase in its annual share dividend from $3.02 to $3.17 per year, effective first-quarter 2019.

2019 Outlook

BCE has provided its financial targets for 2019 in accordance with IFRS 16 accounting standards. The company currently expects revenues to grow between 1% and 3%. While adjusted EBITDA is expected to rise 5-7%, adjusted EPS is expected between C$3.48 and C$3.58. Free cash flow is estimated to grow in the range of 7-12%.

Zacks Rank and Stocks to Consider

BCE currently has a Zacks Rank #3 (Hold). Better-ranked stocks in the industry include Telefônica Brasil S.A. (VIV - Free Report) , Telstra Corporation Ltd. (TLSYY - Free Report) and Cincinnati Bell Inc. (CBB - Free Report) . While Telefônica Brasil and Telstra sport a Zacks Rank #1 (Strong Buy), Cincinnati Bell carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Telefônica Brasil has a long-term earnings growth expectation of 10.4%.

Telstra has a long-term earnings growth expectation of 3.7%.

Cincinnati Bell has a long-term earnings growth expectation of 2%.

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