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BT share price up 4% YTD ahead of Q1 earnings

BT share price: BT's logo is seen at the entrance to their UK office.

The BT Group [BT] share price has risen more than 4% this year to around 180p as of 25 July, outperforming the FTSE 100, which is down roughly 2.7% year to date. That said, the telecoms stock remains some way below the 52-week high of 201.40p that it reached in February. Can the group’s first-quarter results, due out on 28 July, give the shares a boost? 

BT looking to build on solid full-year results

BT reported that adjusted EBITDA grew 2% to £7.6bn in the financial year to 31 March, as a 2% decline in revenue to £20.9bn was offset by “lower costs from modernisation programmes, tight cost management, and lower indirect commissions”, according to a company statement. 

Those savings helped increase reported profit before tax by 9% to £2bn, but profit after tax was down 13% at £1.3bn, mainly due to a deferred tax bill.  

Commenting on the full-year results, chief executive Philip Jansen said that, despite the challenging economic outlook, BT is “continuing to invest for the future”, adding that he was “confident that BT Group is on the right track”. That investment included capital expenditure of £5.3bn, up 25% year-on-year, as the company increased spending on its fibre infrastructure and mobile networks.

Having suspended shareholder pay-outs after the pandemic hit in 2020, the group reinstated its full-year dividend as planned, paying 7.7p per share. 

Upside potential?

BT’s reintroduction of its dividend may go some way towards rehabilitating the FTSE 100-listed company’s reputation as an income stock. BT’s potential as a growth stock certainly appears somewhat limited – the shares last topped the 300p level in 2017. Nevertheless, the above-mentioned 52-week high of just over 200p may imply some upside potential. 

According to the Financial Times’ collation of 24 analysts offering 12-month price forecasts for the BT share price, the average target price was 220p, representing a 24% upside on the 22 July closing price of 177p. Of these analysts, three rated the stock a ‘buy’, nine ‘outperform’, eight ‘hold’ and only four gave it an ‘underperform’ rating.

BT’s near-term capacity for share price gains will partly depend on whether the company can live up to its own forecasts, with management saying that they expect adjusted revenue and EBITDA for the year to March 2023 to grow year-on-year.

Inflation-linked revenue boost

Inflation is likely to boost revenue per customer, as BT raises prices in line with the consumer price index (CPI), plus about 4%. 

With CPI running at more than 9%, BT’s customers could see bills rise by 13% this year, though low earners have been told that their tariffs will not increase. 

BT Sport’s joint venture gets green light

Although the rising cost of living could see some consumers ditch pay TV channels, BT was boosted this month by news that the UK’ s competition watchdog, the Competition and Markets Authority (CMA), had approved the merger between BT Sport and sport channels owned by Warner Bros. Discovery [WBD]. 

The deal will combine BT Sport with Discovery’s Eurosport in Britain and Ireland, allowing BT to split the bill for Premier League broadcast rights. The merger, which was agreed between BT and Discovery in May and cleared by the CMA in July, will now be completed in the coming weeks, according to a BT statement. BT Sport and Eurosport will remain separate brands at first, before being united under a single brand at a later date, the statement added. 

Broadband and 5G rollouts remain key

A key pillar of BT’s plans to grow revenue this year is its broadband deal with the UK government. BT is aiming to roll out full-fibre broadband to 25m UK homes by 2026. The project will see the company benefit from government incentives to deliver faster internet connections around the country, providing BT a guaranteed return on its investment.

BT said in its end-of-year statement that its broadband fibre-to-the-premises (FTTP) rollout had reached 7.2m properties, with 750,000 premises serviced in Q4 at an average rate of over 58,000 premises per week. Meanwhile, the group’s EE mobile network was again named the UK’s best 4G and 5G network operator by industry body RootMetrics, as EE’s 5G network expanded to cover over 50% of the UK population. 

An update on the progress of broadband and 5G expansion will likely be among the key items of interest when BT announces its Q1 results at 7am on Thursday 28 July.

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