Why Is BCE (BCE) Up 9.7% Since Last Earnings Report?

A month has gone by since the last earnings report for BCE (BCE). Shares have added about 9.7% in that time frame, underperforming 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 the most recent earnings report in order to get a better handle on the important catalysts.

BCE Beats Q1 Earnings Estimates, Withdraws 2020 Guidance

BCE reported mixed first-quarter 2020 results, with the bottom line beating the Zacks Consensus Estimate and the top line missing the same.

Despite the impact of COVID-19, the company delivered positive service revenues and adjusted EBITDA growth in the first quarter. The performance was supported by ongoing broadband wireless, Internet and IPTV subscriber base expansion and a 2.6% reduction in total operating costs.

Net Income

Net earnings in the March quarter declined 8.1% year over year to C$680 million or C$0.75 per share. The deterioration was caused by higher other expenses stemming from net mark-to-market losses on derivatives used to economically hedge equity-settled share-based compensation plans, partially offset by higher adjusted EBITDA and lower income taxes.

First-quarter adjusted net earnings came in at C$720 million ($536.8 million) or C$0.80 (58 cents) per share compared with C$692 million or C$0.77 per share in the prior-year quarter. The bottom line beat the Zacks Consensus Estimate by 2 cents.


The Canada-based telecommunications company’s quarterly total operating revenues dropped 0.9% year over year to C$5,680 million ($4,187 million). The downtick was due to reduced commercial activity as a result of COVID-19 that affected financial results for all Bell operating segments. The top line marginally lagged the consensus estimate of $4,196 million.

Service revenues inched up 0.3% to C$5,058 million on higher year-over-year wireless service and media revenues. Product revenues fell 9.7% to C$622 million, reflecting reduced wireless transactions due to COVID-19 and lower business wireline data equipment sales.

Segment Results

Revenues in Bell Wireless fell 2% year over year to C$2,035 million ($1,517.1 million) due to lower product revenues, partially offset by higher service revenues. Service revenues improved 0.5% to C$1,547 million, driven by postpaid and prepaid subscriber base growth over the past year. Product revenues declined 9.1% to C$488 million due to a reduction in customer transactions attributable to retail channel disruptions because of the COVID-19 pandemic.

Revenues in Bell Wireline fell 0.7% year over year to C$3,076 million ($2,293.2 million). Service revenues were almost stable at C$2,941 million, as voice revenue-erosion from traditional NAS, long-distance and satellite TV services was primarily offset by higher data revenues from retail Internet and IPTV subscriber growth. Product revenues declined 11.8% to C$135 million due to fall in low-margin data equipment sales to large business enterprise customers and delays in customer spending, considering the current economic environment.

Bell Media generated revenues of C$752 million ($560.6 million), up 0.9% year over year on higher subscriber revenues from Crave growth in the past year and contract renewals with TV distributors. Advertising revenues declined year over year primarily due to the impact of COVID-19 on customer spending across all advertising platforms as the commercial activity has been curtailed and major sports leagues suspended.

Other Details

Overall adjusted EBITDA was C$2,442 million, up 1.4%. The upside was driven by increases of 4% at Bell Wireless and 0.5% at Bell Wireline. Bell Media’s adjusted EBITDA declined 6.1% due to the impact on advertising sales attributable to COVID-19. Adjusted EBITDA margin improved to 43% from 42%, reflecting a 2.6% reduction in operating costs from lower variable costs of subscriber acquisition and year-over-year decline in low-margin wireline product sales.

Cash Flow & Liquidity

In the first quarter, BCE generated C$1,451 million of cash from operating activities compared with C$1,516 million in first-quarter 2019. The downtick was caused by higher interest paid and lower cash from working capital. Free cash flow for the same period was C$627 million compared with C$642 million in the prior-year quarter, thanks to lower cash flows from operating activities.

As of Mar 31, the company had C$2,679 million ($1,890.2 million) in cash and equivalents with C$25,513 million ($18,001 million) of long-term debt compared with the respective tallies of C$145 million and C$22,415 million at the end of the prior quarter.

2020 Outlook

Due to uncertainties related to COVID-19, BCE has withdrawn all of its 2020 financial guidance that was announced on Feb 6. That said, the company’s underlying business fundamentals remain strong. Its strong liquidity position, underpinned by a healthy balance sheet, substantial free cash flow generation and access to the debt and bank capital markets, is expected to provide financial flexibility to execute on its planned capital expenditures for 2020.

Conversion rate used:

C$1 = $0.745525 (period average from Jan 1, 2020 to Mar 31, 2020)

C$1 = $0.705574 (as of Mar 31, 2020)

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -9.67% due to these changes.

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 second quintile 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.


Estimates have been broadly trending downward for the stock, and the magnitude of these revisions 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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