BT Group PLC (LSE:BT.A) is in a relatively strong position leading up to its third-quarter earnings call, at least in comparison to beleaguered competitor Vodafone.
Goldman Sachs (NYSE:GS) analysts repeated a buy rating for the British telecoms multinational in recent weeks, with free cash flows revised upwards by 3-4%, noting that “BT’s Digital Infrastructure fibre monetisation is running ahead of our bullish expectations”.
Meanwhile, Citi analysts upgraded BT to a buy rating with a price target of 160p on the back of above-inflation price hikes pencilled in for the coming months (although UBS suggested that these hikes could already be factored into the share price).
Full-year guidance laid out by the group in November’s interims outlined a minimum adjusted EBITDA target of £7.9bn, free cash flows between £1.3bn and £1.5bn, and a meaty capital expenditure bill of £5bn.
But Berenberg analysts reckon this could be a tall order. The investment bank predicts a meagre 0.4% of year-on-year EBITDA growth for the third quarter, leaving a 5.5% quarterly target for the final quarter to achieve £7.9bn.
Those record 1.4% price hikes scheduled for April – a brutal four percentage points above current inflation – will thus be carrying a lot of weight for the rest of the financial year, so investors and customers alike will be hoping for more details on Thursday, given the political and regulatory uncertainty surrounding the hikes.
Since a lot hinges on BT’s pricing policy, the group “may well be walking either the tightrope or the plank going into its quarterlies”, as previously stated here.
An update on BT's merger talks with Three UK will also be an investor focus.
BT shares are currently changing hands at 123.80p with a dividend yield of 6.22%.
Although these yields pale in comparison to Vodafone’s 8%-plus offering, BT is objectively less risky, given its 2.5-times dividend cover against Vodafone’s 0.8-times cover.