BCE faces a slowing wireless market, says Echelon Wealth Partners

Quarterly results from BCE (BCE Stock Quote, Chart TSX:BCE) showed a modest beat on top and bottom lines but the increase in the company’s share price so far this year is cause for a pause, says Echelon Wealth Partners analyst Rob Goff, who in an earnings report on Friday reiterated his “Hold” rating and $59.00 target.

Telecom and media company BCE delivered its first quarter ended March 31, 2019, on Thursday, featuring operating revenues of $5.73 billion, up 2.6 per cent year-over-year and Adjusted EBITDA of $2.41 billion, up 6.9 per cent year-over-year. EPS was $0.82 per share as compared to last year’s $0.73 per share.

Goff says that the results were very much in line with the consensus expectations, while pointing out that BCE’s media segment, where revenues came in below expectations, actually grew its EBITDA by 26.9 per cent year-over-year and at $165 million was $31 million ahead of the consensus. The company’s wireless segment was down 7.7 per cent year-over-year, however, in the closely-watched category of postpaid additions.

But the run-up in the stock, which has gained 12 per cent year-to-date, contributes to maintaining his current rating, says Goff.

“We are sticking with our Hold rating given current valuations against a backdrop of a slowing wireless market with some prospective instability in market shares and a wired market where its largest competitor is likely to push harder on subscriber growth,” says Goff.

“Our rating is held up by our confidence that BCE management will continue its hallmark, strong execution. Improving media is encouraging and brings a financial buffer but its impact will be modest at 8 per cent of overall 2019 EBITDA. We look for modest forecast fine-tuning as we have done however nothing significant,” he says.

Goff’s forecast calls for 2019 revenue and EBITDA of $24.000 billion and $10.079 billion, respectively. His $59.00 target represents a projected return of 2.6 per cent at the time of publication.