Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.
Key Morningstar Metrics for BCE
What We Thought of BCE’s Earnings
BCE BCE posted a 1.3% revenue decline in the first quarter, while adjusted EBITDA was flat due to continued cost management as competition persists. The firm cut its dividend to C$1.75 for 2025, down from C$3.99, and introduced a new partnership for its Ziply business to improve its balance sheet.
Why it matters: BCE’s excessive dividend and the pending acquisition of Ziply have stressed its balance sheet amid a heightened competitive landscape in Canada’s telecom market. While an improving wireless landscape may take time, BCE is now in a better position to capitalize over the long term.
In the first quarter, BCE posted net postpaid wireless declines of nearly 10,000 and average revenue per user of C$57, down 2% year over year. Its 9,500 net internet adds were a step down from last year’s 31,000. Lower immigration is affecting both businesses.BCE’s net debt leverage of 3.6 times doesn’t fully illustrate its stretched financial position. The acquisition of Ziply, which will cost C$7 billion, will also require high capital spending. The reduced dividend Ziply JV should return net debt leverage to management‘s 3.5 target by 2027.
The bottom line: We maintain our C$45 per share fair value estimate for narrow-moat BCE. Although we expect competition to persist in the near term, we think BCE will be able to drive its fair share of wireless and wireline customers in the coming years.
Shares look cheap to us. We think the market is over-extrapolating May 8’s competitive environment. Although we’ve maintained our fair value estimate, the firm’s recent capital dealings better position BCE to withstand any near-term competitive headwinds.Our long-term forecast remains unchanged. We expect BCE to add nearly 100,000 net new postpaid wireless subscribers each year between 2026 and 2029, with marginal price improvements. We expect adjusted EBITDA margins to expand as BCE continues to drive penetration in its fiber network.
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