BCE Inc. (TSX:BCE)(NYSE:BCE), the largest communications company in Canada, announced its first-quarter earnings results on April 28, and its stock has reacted by rising about 1%. Let’s take a closer look at the results and the fundamentals of its stock to determine if we should be long-term buyers today, or if we should hold off on an investment for the time being.
A quarter of top- and bottom-line growth
Here’s a summary of BCE’s first-quarter earnings results compared with what analysts had expected and its results in the same period a year ago.
| Metric | Q1 2016 Actual | Q1 2016 Expected | Q1 2015 Actual |
| Adjusted Earnings Per Share | $0.85 | $0.84 | $0.84 |
| Operating Revenues | $5.27 billion | $5.32 billion | $5.24 billion |
Source: Financial Times
BCE’s adjusted earnings per share increased 1.2% and its revenue increased 0.6% compared with the first quarter of fiscal 2015. Its slight earnings-per-share growth can be attributed to its adjusted net earnings increasing 4.1% to $734 million, but this partially offset by its weighted-average number of common shares outstanding increasing 3% to 868.1 million.
Its slight increase in revenue can be attributed to its revenues increasing 3.4% to $1.69 billion in its Bell Wireless segment and 2.1% to $741 million in its Bell Media segment. The growth in its Wireless segment can be attributed to its service revenues increasing 5.3% to $1.58 billion, driven by its total number of subscribers increasing 1.6% to 8.24 million and its average revenue per user increasing 3.6% to $63.02.
The growth in its Media segment can be attributed to increased subscriber revenues, driven by the expansion of The Movie Network into a national pay TV service on March 1 and rate increases on some of its specialty channels.
Here’s a quick breakdown of eight other notable statistics from the report compared with the year-ago period:
- Revenues decreased 1.5% to $2.98 billion in its Bell Wireline segment
- High-speed Internet subscribers increased 3.4% to 3.41 million
- TV subscribers increased 3.4% to 2.75 million
- Local telephone subscribers decreased 6.4% to 6.57 million
- Adjusted earnings before interest, taxes, depreciation, and amortization increased 3.3% to $2.16 billion
- Cash flows from operating activities increased 23.4% to $1.29 billion
- Free cash flow increased 81% to $418 million
- Free cash flow per share increased 77.8% to $0.48
What should you do with BCE today?
It was a great quarter overall for BCE, so I think the market has reacted correctly by sending its shares higher. I also think the stock represents a great long-term investment opportunity today for two primary reasons.
First, it’s inexpensive. BCE’s stock trades at just 16.8 times fiscal 2016’s estimated earnings per share of $3.50 and only 16 times fiscal 2017’s estimated earnings per share of $3.67, both of which are inexpensive compared with the industry average price-to-earnings multiple of 21.9, and the latter of which is inexpensive compared with its five-year average multiple of 16.5. These multiples are also inexpensive given the strength and stability of BCE’s balance sheet and its estimated 4.8% long-term earnings growth rate.
Second, it has a great dividend. BCE pays a quarterly dividend of $0.6825 per share, or $2.73 per share annually, which gives its stock a high and safe yield of about 4.6%. Investors must also note that the company has raised its annual dividend payment for seven consecutive years, and its 5% hike in February has it on pace for 2016 to mark the eighth consecutive year with an increase.
With all of the information provided above in mind, I think all Foolish investors should strongly consider beginning to scale in to long-term positions in BCE today.
