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Telefonica’s (TEF) Earnings and Revenues Grow Y/Y in Q1

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Spanish telecom giant, Telefonica S.A. TEF reported strong financial results in the first quarter of 2017, wherein both top line and bottom line grew year over year.

Quarterly net income was €779 million (approximately $830 million) compared with a net income of €548 million (approximately $857 million) in the year-ago period. Moreover, first-quarter earnings per ADR (American Depository Receipt) came in at 19 cents, up an astonishing 216.7% year over year.

Telefonica recorded total revenue of €13,132 million (roughly $13,993 million) in the reported quarter, up 5% year over year.

Operating income before depreciation and amortization (OIBDA) came in at €4,021 million ($4,284.8 million), up 4.8% on a reported basis and also up 1.3% on an organic basis. Quarterly OIBDA margin was 30.6% compared with 30.5% in the year-ago quarter. Operating income was €1,570 million (around $1,673 million) in the reported quarter, up 3.6% year over year.


Segmental Detail

Telefonica Latin America: Revenues in Brazil increased 30.2% on a reported basis and 1.6% on an organic basis to €3,165 million ($3,372.6 million). Meanwhile in the Hispano-American markets, revenues grew 7.6% on a reported basis and 9.2% on an organic basis to €3,285 million ($3,500.5 million). OIBDA margin in Brazil and the Hispano-American markets was 34.9% and 27.5% in comparison with the year-ago figures of 33.1% and 28.3%, respectively. In Brazil, Telefonica operates through its subsidiary Telefonica Brasil SA VIV.

Telefonica Europe: In Spain, revenues increased 5% on a reported basis and 1.5% on an organic basis to €3,066 million (approximately $3,267.1 million). OIBDA margin in Spain was 37.3% compared with 39.7% in the year-ago quarter. Revenues from Telefonica Deutschland were down 4.7% to €1,771 million ($1,887.2 million) on both reported and organic bases. OIBDA margin in Deutschland was 22.6% compared with 21.1% in the year-ago quarter. Revenues from Telefonica UK were down 8.6% on reported basis but up 2.1% on organic basis to €1,601 million ($1,706 million). OIBDA margin in the UK was 26% compared with 26.4% in the year-ago quarter.

Subscriber Statistics

As of Mar 31, 2017, total customer access lines were approximately 346.8728 million, down 0.1% year over year. Notably, in the Latin American markets, Telefonica competes with large global telecom operators like AT&T, Inc. T and America Movil S.A.B. de C.V. AMX.

On a year-over-year basis, mobile access increased 0.8% to 274.0556 million customers. Total Internet and data access grew 0.7% to 21.6578 million users. Pay-TV access totaled 8.2193 million, down 1.7% year over year. LTE customer count was 75.4588 million, up an astounding 72% year over year, representing 29.1% of total mobile accesses. Fiber and VDSL access was 9.5806 million, up a substantial 20.8% year over year. Broadband access was 21.1196 million, up 0.5% year over year.

Liquidity and Cash Flow

Telefonica ended the first quarter of 2017 with cash and cash equivalents of €7,391 million (around $7,875.8 million) compared with €3,736 million (roughly $4,034.9 million) at 2016-end. The company exited the reported quarter with total debt of about €48,766 million (about $51,965 million) compared with €74,554 million ($80,518 million) recorded at the end of 2016.

In the first quarter of 2017, Telefonica generated €2,743 million (around $2,922.9 million) of cash from operations, up 24.3% year over year. Free cash flow in the reported period was €453 million (approximately $482.7 million) compared with a negative €72 million in the prior-year quarter.

Telefonica SA Price, Consensus and EPS Surprise

Telefonica SA Price, Consensus and EPS Surprise | Telefonica SA Quote

Outlook for 2017

Telefonica expects revenues to remain flat with the 2016 figure. OIBDA margin will expand 0.01% and capital expenditure will be around 16% of total revenue.

Telefonica currently sports a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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