Adding 31,746 TV customers and 58,137 customers for its high-speed Internet service improved revenue 1.8% for this company during the most-recent quarter.
A CRTC ruling will likely cost the firm $100 million but the company plans to compensate with expanded services to rural areas.
The stock trades at just 18.2 times the company’s 2019 earnings forecast.
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BCE INC., (Toronto symbol BCE), is a buy. The company is Canada’s largest traditional telephone service provider: it has 2.8 million residential customers in Ontario, Quebec, Manitoba and the Atlantic provinces. The company also has 3.5 million high-speed Internet users and 2.8 million TV subscribers. In addition, BCE sells wireless services to 9.8 million users across Canada and owns TV and radio stations.
The company’s investors continue to benefit from the ongoing improvements to its networks, which help to attract new customers.
However, the company is required by the Canadian Radio-television and Telecommunications Commission (CRTC), like all of the country’s large telecom companies, to sell smaller Internet providers access to its high-speed networks. The CRTC’s aim is to improve competition and lower prices.
The industry regulator has now cut the rates that those smaller providers must pay BCE and others. The company expects the decision will cost it $100 million.
To offset the lower fees, BCE will curtail its plans to expand wireless high-speed service to rural areas in Manitoba, Ontario, Quebec, and Atlantic Canada.
As a result, BCE will now connect 1 million households in those areas, down from its earlier target of 1.2 million.
Thanks partly to the recent launch of new unlimited wireless data plans, BCE signed 127,172 wireless customers to long-term contracts (net of cancellations) in the three months ended September 30, 2019. That’s up 23.5% from the second quarter of 2019, but it’s down 6.0% from the third quarter of 2018; that year-earlier period benefited from a contract with an agency of the federal government. That agreement ended before the latest quarter.
The company also added 31,746 customers for its Fibe TV business in the latest quarter as well as 58,137 customers for its high-speed Internet service. Both numbers are net of cancellations.
Thanks to these gains, revenue rose 1.8%, to $5.98 billion from $5.88 billion a year earlier. That beat the consensus forecast of $5.97 billion.
Earnings before one-time items in the quarter fell 5.2%, to $0.91 a share from $0.96. That missed the consensus estimate of $0.92 a share.
The lower earnings are mainly because the year-earlier earnings benefitted from a tax adjustment based on its March 2017 acquisition of Manitoba Telecom. Higher interest costs also dampened earnings growth.
For all of 2019, BCE still expects to earn between $3.48 and $3.58 a share. The stock, which has gained 19% for investors in the past year, trades at a reasonable 18.2 times the midpoint of that range. The $3.17 dividend yields a high 4.9% and has grown an average of 5.1% annually over the last 5 years.
The company last raised its quarterly dividend with the April 2019 payment by 5.0%, to $0.7925 a share from $0.755.
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I would like to invest in eco friendly and companies that are creating technology that invests in cleaning up the environment. What advice can you give and stock recommendations
Thanks for your question. We haven’t found any environmental cleanup companies we want to recommend as buys – but we’ll keep looking, and may analyze some we see as okay to hold in our weekly Advice for Inner Circle Members email.