BCE (BCE, $44.97): National Bank Financial analyst reduces its target price over one year
Canadian telecommunications service provider BCE will reveal its second quarter financial results on August 1.
National Bank Financial analyst Adam Shine expects the company to report revenues of $6.03 billion, earnings before interest, taxes, depreciation and amortization (EBITDA) of 2.68 billion, adjusted earnings per share of $0.78 and free cash flow of $828 million after reducing its guidance.
“They remain above analyst consensus except for free cash flow,” he says.
According to him, the analyst consensus is for revenues of $6.105 billion, EBITDA of $2.69 billion, adjusted earnings per share of $0.78 and free cash flow of $785 million.
“We expect the Media division to benefit from increased advertising revenue from Euro 2024, but also expect a decrease in average revenue per subscriber, which is the result of price reduction tactics in the industry which seem excessive to us and undermine growth opportunities,” he judges.
The analyst expects savings linked to recent restructuring (Bell announced the elimination of 9% of its workforce, or 4,800 positions, on February 8) to reach $35 million during the second quarter, compared to 16 $M for the previous quarter. “Savings should progress more quickly in the second half of the year and reach the objective of $150 million to $200 million in 2024, on the way to achieving the recurring objective of $250 million per year,” says he.
Adam Shine also specifies that the final payment of $414 million that BCE was to make for the acquisition of the 3800 megahertz (MHz) frequency spectrum was made on May 29.
For wireline services, the analyst expects revenues to decline 1.5% year-over-year. “Growth is weakened by the more generous discounts granted for subscriber acquisition and customer loyalty and on residential service packages,” he says.
It expects a gain of 28,000 subscribers to Internet services and a gain of 6,000 subscribers to IP television.
On the mobile telephony side, the analyst maintains that immigration will generate robust subscriber gains, but that aggressive promotions will reduce the average price per user by 2% over one year to $57.98, then that the analyst consensus is at $58.82.
“BCE should gain 100,000 subscribers to its postpaid services and 25,000 subscribers to its prepaid services,” he says. Its recommendation on the stock remains at “outperform”, but its one-year target price falls slightly, from $52 to $50