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BCE (BCE) Down 3.7% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for BCE (BCE). Shares have lost about 3.7% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is BCE due for a breakout? 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 Q4 Earnings Lag Estimates, Revenues Beat on Segment Strength

BCE reported mixed fourth-quarter 2019 results, wherein the top line surpassed the Zacks Consensus Estimate but the bottom line missed the same.

Net Income

Quarterly net earnings increased 10.9% year over year to C$672 million or C$0.74 per share. Earnings were driven by strong growth in adjusted EBITDA, decreased severance, acquisition and other costs, and lower other expenses due to decline in non-cash media asset impairment charges. However, the momentum was partly offset by increased depreciation and amortization, and higher finance costs. For 2019, net earnings were C$3,040 million or C$3.37 per share compared with C$2,785 million or C$3.10 per share in 2018.

Fourth-quarter adjusted net earnings came in at C$794 million ($601.5 million) or C$0.88 (67 cents) per share compared with C$794 million or C$0.89 per share in the prior-year quarter, reflecting higher outstanding shares. The bottom line missed the Zacks Consensus Estimate by 2 cents.


The Canadian telecommunications company’s quarterly total operating revenues increased 1.6% year over year to C$6,316 million ($4,784.7 million). This was led by healthy top-line growth at Bell Wireless and Bell Media that resulted in higher overall service revenues. Service revenues grew 0.9% to C$5,276 million on wireless, Internet and IPTV subscriber base growth. Product revenues were up 5.7% to C$1,040 million, driven by increased wireless transaction volumes and a greater sales mix of higher-value smartphones. The top line surpassed the consensus estimate of $4,782 million. For 2019, revenues increased 2.1% year over year to C$23,964 million.  

Quarterly Segment Results

Revenues at Bell Wireless increased 3.6% year over year to C$2,493 million ($1,888.6 million). Service revenues improved 1.6% to C$1,619 million, driven by subscriber base growth and higher revenue contribution from prepaid services. Product revenues increased 7.4% to C$874 million supported by higher sales mix of premium smartphones and higher-value rate plans.

Revenues at Bell Wireline remained almost flat year over year at C$3,138 million ($2,377.2 million). Higher Internet and IPTV revenues was offset by lower voice revenues from traditional NAS and long distance services, the impact of acquisition and retention discounts on residential service bundles to match aggressive competitor promotions, and lower TV pay-per-view revenues compared with last year. Service revenues were up 0.1% to C$2,969 million, while product revenues declined 0.6% to C$169 million.

Bell Media generated revenues of C$879 million ($665.9 million), up 3.4% year over year, led by higher revenues from Crave subscriber growth and contract renewals with TV distributors. Advertising revenues were stable as increases in entertainment, sports and news specialty services and at Astral out of home were offset by soft conventional TV and radio performance.

Other Details

Adjusted EBITDA was C$2,508 million, up 4.8%, driven by increase of 7.4% in wireless, 1.5% in wireline and 16.5% in media. Adjusted EBITDA margin improved to 39.7% from 38.5%, backed by flow-through of service revenue growth, increasing broadband Internet scale and ongoing cost discipline as reflected in a 0.3% reduction in total operating costs.   

Cash Flow & Liquidity

In 2019, BCE generated C$7,958 million of cash from operating activities compared with C$7,384 million in 2018. The increase was mainly due to adjusted EBITDA growth and lower income tax. Free cash flow for the same period was C$3,818 million compared with C$3,567 million in 2018, driven by higher cash flows from operating activities (excluding acquisition and other costs paid). As of Dec 31, 2019, the company had C$145 million ($111.4 million) in cash and equivalents with C$22,415 million ($17,218.6 million) of long-term debt compared with the respective tallies of C$425 million and C$19,760 million a year ago.

2020 Outlook

BCE has provided its financial targets for 2020 in accordance with IFRS 16 accounting standards. The company expects revenues to grow between 1% and 3%. While adjusted EBITDA is expected to rise 2-4%, adjusted EPS is expected between C$3.50 and C$3.60. Free cash flow is estimated to grow in the range of 3-7%.

Conversion rate used:

C$1 = $0.757560 (period average from Oct 1, 2019 to Dec 31, 2019)

C$1 = $0.768174 (as of Dec 31, 2019)

How Have Estimates Been Moving Since Then?

Estimates revision followed a downward path over the past two months. The consensus estimate has shifted -16.67% due to these changes.

VGM Scores

Currently, BCE has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Charting a somewhat similar path, 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.


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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