What to do with the securities of BCE, TFI International and Jamieson Wellness? Here are some recommendations from analysts likely to move prices soon. Note: the author may have a totally different opinion from that expressed.
ECB (ECB, $60.70): Q1 will reflect both sides of inflation
National Bank Financial’s Adam Shine forecast for BCE’s first quarter, which will be released on May 4, is fairly in line with the consensus. The main telecommunications provider in the country will have benefited from favorable winds, including immigration, the increase in certain prices and a small lull in competition.
Rising costs, however, will prevent the company’s margins from benefiting from these boosts.
The analyst forecasts a 2.6% rise in revenue (to $6 billion), a 1.9% decline in operating profit (to $2.5 billion) and a 12% drop in profit from share (at $0.78).
Revenues will have benefited from the new increase in internet prices imposed in January. Without the effect of this inflation, the increase in income would have been 0.4%.
On the other hand, the operating profit will have suffered from a $25 million increase in costs, which increases the operating margin from 44.2 to 42.3%. Adam Shine warns that operating profit could miss its target slightly.
Revenues from residential wireline services will grow by at least 9% thanks to higher rates and market share gains, despite the discounts on certain packages and promotions for the two-year contracts offered. Wireline business services should have benefited from an improved supply chain and increased sales of data services.
The number of Internet service subscribers should have increased by 30,000, slightly more than the addition of 26,000 new subscribers a year earlier. On the other hand, the Fibe TV service will have lost 10,000 subscribers while Bell Canada will have lost another 45,000 residential telephone service subscribers.
Wireless service, which provides 35% of total revenues, will once again be the star, with an expected 7% increase in revenues to $2.35 billion. Adam Shine attributes this performance to the continued growth of immigration to the country and less intense competition than in the previous quarter. “The first quarter saw more focused customer retention and retrieval efforts than aggressive efforts to acquire new customers,” the analyst explains.
This performance will result in a 0.8% increase in the average monthly revenue per wireless subscriber (to $58.41) while the postpaid churn rate will have increased by 4 percentage points to 0.83%. In the end, the operating profit of the wireless service will have increased by 5.9% to just over a billion dollars, although the operating margin will have shrunk from 45.9 to 45.4%.
The first quarter will also see the company consolidate the results of its wireline and wireless services under the communications and technology services segment. It will therefore no longer be possible to isolate the operating profit of each of these services.
Finally, capital expenditures will have increased by 13% to $1.08 billion, so that free cash flow will have fallen by 0.9% to $709 million.
The unsurprising quarter does not change the outlook for the stock, which Adam Shine does not recommend buying. Its target price remains at $63, which offers a potential total return of 10%, including the dividend of 6.37%.
The steep rise in rates has depreciated BCE’s stock by 18% since the annual high reached in April 2022.