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BCE Hits 52-Week High: What’s Driving the Outperformance?

Zacks

Shares of BCE Inc. BCE scaled a new 52-week high of $44.86 in yesterday’s trading session, before closing a tad lower at $44.83. Over the past three months, the stock has gained 7.7% compared with 1.1% growth recorded by the industry.



Growth Drivers

Bell — wholly owned by BCE — has been experiencing healthy customer additions in broadband wireless, Internet, TV and streaming businesses, which is driving revenue and adjusted EBITDA growth across the company’s wireline, wireless and media operating segments. Moreover, Bell’s broadband leadership strategy continues to deliver unmatched network performance and service innovation to customers coupled with value enhancement to shareholders.

The Canadian telecommunications company’s wireless segment continues benefiting from the healthy traction in postpaid business. Significant investments in network coverage, customer retention, lucrative data plans and the launch of new handsets are likely to drive subscriber base expansion. Its operating arm Bell Media’s leadership in conventional and digital media, including solid growth in specialty channels, is a tailwind.

BCE is also deploying full broadband Internet service into smaller towns and rural locations with leading-edge Wireless to the Home technology, which is upgradeable to 5G wireless service in future. Bell has announced that it is expanding its Wireless Home Internet rollout plan in rural Canada by 50% — a major infrastructure expansion due to the federal government’s Accelerated Investment Incentive program.

On the wireline front, BCE anticipates financial performance to improve in 2019 and beyond as it continues to gain from an increase in net revenue generation units. The EBITDA growth trend in the segment is also expected to stay. It continues to leverage from FibeTV and FibreOP TV growth, price hike and an improved business market stemming from a steady economy.

The company has provided its financial targets for 2019 in accordance with IFRS 16 accounting standards. It expects revenues to grow between 1% and 3%. While adjusted EBITDA is estimated to rise 5-7%, adjusted EPS is expected to be between C$3.48 and C$3.58. Free cash flow is estimated to grow in the range of 7-12%.

BCE is likely to benefit from robust activities in the wireless business, strong subscriber addition, drop in churn rates and its focus on technology upgrades. The company continues to focus on six strategic areas — investment in broadband network and services, accelerating wireless services, leveraging wireline momentum, expanding media coverage, improving customer service and achieving a competitive cost structure. These initiatives are expected to generate higher revenues per user and attract new customers in the coming quarters.

In addition, Bell announced that it has partnered with the City of Markham in a smart city initiative. Notably, the program will deploy Bell's smart city platform — an advanced solution of interconnected Internet of Things applications — to improve the efficiency of municipal operations while augmenting services for residents.

With continued growth impetus and solid prospects, the Zacks Rank #3 (Hold) stock is anticipated to hit new 52-week high milestones in 2019.

Stocks to Consider

A few better-ranked stocks in the industry are Telstra Corporation Ltd. TLSYY, BT Group plc BT and Deutsche Telekom AG DTEGY, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Telstra has a long-term earnings growth expectation of 3.7%.

BT Group currently has a forward P/E (F1) of 8.4x.

Deutsche Telekom currently has a forward P/E (F1) of 14.2x.

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