BCE warns higher rates will take a bite out of 2023 earnings

BCE Inc. is warning adjusted earnings per share will fall by as much as seven per cent in fiscal 2023 due to a slew of factors, including the impact of higher rates on its debt-servicing costs.
 
The company says it sees adjusted EPS falling between three and seven per cent as interest costs rise, depreciation and amortization expenses push higher due to investment in next-generation 5G networks and a lack of tax adjustments limit its ability to offset those headwinds.
 
That forecast came alongside the company’s fourth-quarter results, where the telecom operator essentially met analyst expectations. Adjusted earnings per share came in at $0.71 against an estimate of $$0.72. Meanwhile, revenue rose nearly four per cent from a year earlier to $6.44 billion versus an average analyst view of $6.39 billion.
 
Net earnings were $567 million, down from $658 million in Q4 of 2021, which the company attributed to higher asset impairment charges and increased interest expense.
 
Overall, it was a stronger finish to the year for the wireless business as it rolls out its 5G network: wireless revenue rose 7.7 per cent year-over-year, while postpaid net subscriber activations – those key, higher-value cell phone customers – were up 41.2 per cent to 154,617 in the quarter.
 
In a note to clients, Scotiabank analyst Maher Yaghi said that beyond those subscriber growth numbers, the company got a boost from signing up those customers to higher-end plans.
 
“Service revenue grew 5.8% y/y at $1.7B vs. our estimate of $1.8B. The strong y/y growth is primarily the result of growth in subscribers (+5.2%) but also a continued drive by BCE to load customers on higher end plans,” he said.
 
However, churn – a key industry metric on customer turnover – rose 14 basis points to 1.22 per cent in the quarter, which the company blamed on higher promotional activity in the back half of the year.
 
In a release, BCE Inc. chief financial officer Glen LeBlanc said the company’s 2022 results were in no small part due to its ability to clear some clear macroeconomic hurdles. 
 
“We also delivered positive adjusted EBITDA growth, despite unprecedented cost pressures from inflation and record storms, an expensive and highly competitive Black Friday, and media advertising softness, which is a testament to our ability to execute under any condition,” he said.
 
The company also announced a 5.2 per cent increase to its quarterly dividend, bringing the payout to $0.9675 per common share.
 
BCE is the parent company of BNN Bloomberg through its Bell Media division.