BT Group PLC (LSE:BT.A) is set to announce a strong first quarter on the back of its recent big price hikes, according to Citigroup.
Forecasts for the FTSE 100 group were updated ahead of results scheduled for 27 July, incorporating the formation of BT Business and changes in costs allocation across segments.
"In summary, we expect a strong quarter on the back of price increases implemented since [the beginning of] April," analysts at Citi wrote in a note.
Part of the pricing benefits are expected to be offset by heavier retention discounts in the consumer business and partly by discounts at Openreach, they added.
But "sufficient levers" were seen to drive BT's underlying profits (EBITDA) to grow at a proforma rate of 4.3% in the first quarter of the new financial year and 3.1% for the whole of the year. This is 1.7% above the Square Mile forecast consensus for Q1 and 2% for the full year, it was noted.
"BT is our top pick into Q1 results due to stronger than market expected growth and high probability of structural shifts in the market as weaker business models get challenged by higher funding costs," the analysts said.
The positive stance from Citi differs from other analysts.
UBS recently warned that pressures on BT's free cash flow are creating risks that it will have to cut its dividend in half, while Deutsche Bank trimmed its target price as it sees major uncertainties over how the Openreach fibre roll-out will turn out.
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