BMO: CaseyMay 2, 2024 | 08:49 ET~ BCE BCE-TSX BCE-NYSE
Rating Market Perform
Price: May-1 $45.76 Target $46.00 Total Rtn 9%
Roughly In-Line Quarter; Cost Savings Plans Progressing
Bottom Line: Q1 financials were mixed but roughly in line with revenue missing by ~1% and EBITDA beating by ~1%.
EPS was $0.72 vs. $0.70 Street.
Wireless metrics were modestly ahead of expectations with postpaid phone adds (+45k), flat ARPU, and elevated postpaid churn (1.21%).
Wireline subscriber metrics were solid with continued strong internet (+31k).
FY2024 guidance was reaffirmed.
Cost savings related to restructuring are expected to ramp up as the year progresses.
Key Points
Q1 results roughly in line.
Consolidated revenues decreased -1% to $6,011mm (consensus $6,037mm), and
Adj.EBITDA increased 1% at $2,565mm (consensus $2,551mm) with margins improving 80bps to ~43%.
Adj. EPS was $0.72 vs. $0.85 last year (consensus $0.70).
Reported FCF was flat y/y at $85mm reflecting lower capex and lower operating cash flows.
2024 guidance reaffirmed.
BCE expects revenue growth of 0-4% (consensus +0.7%),
Adj. EBITDA growth of 1.5-4.5% (consensus +2.2%), capex intensity of <16.5% (consensus 16.4%), Adj. EPS decline of 2-7% (consensus -6.2%) and a FCF decline of 3-11% (consensus -7.4%).
As previously stated, the weak FCF guide reflects restructuring, working capital, and higher interest/tax payments.
BCE increased its target leverage from 2.5x to 3.0x.
Communications & Technology Services a tough light. Revenue was flat at $5,375mm (consensus $5,391mm). Network revenue was +3% to $1,774mm (consensus $1,785mm) and adj. EBITDA increased 2% to $2,448mm (consensus $2,440mm; margins +70bps to ~46%) reflecting higher service revenue, sales mix, and cost reduction initiatives.
Wireless subscriber metrics were better than expected, while churn remained elevated.
BCE posted +45k postpaid phone and -20k prepaid phone net adds (consensus +38k postpaid and -16k prepaid), blended ARPU was flat at $58.14 (consensus $57.84), and postpaid churn weakened 31bps to 1.21% (consensus 1.07%).
Wireline subscriber metrics were a modest beat. Wireline subscriber net adds were strong with slightly better-than-expected Internet (+31k) and IPTV (+14k), and roughly in line Residential Voice (-44k).
The company no longer reports satellite TV subscriber metrics.
Media results mixed.
Revenue decreased -7% to $725mm (consensus $739mm), and Adj.
EBITDA decreased -11% to $117mm (consensus $111mm; margins -80bps to ~16%), driven by lower revenues partially offset by lower opex due to lower programming costs impacted by the Hollywood strikes, restructuring initiatives, and the stoppage of a broadcast license fee.