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Telefonica (TEF) Earnings and Revenues Increase Y/Y in Q3

Spanish telecom giant, Telefonica S.A. TEF, reported impressive financial results in the third quarter of 2017. Both the top line and the bottom line grew year over year. 

Quarterly net income was €839 million (approximately $986 million), reflecting a decline of 10.2% year over year.  However, third-quarter earnings per ADR (American Depository Receipt) came in at 23 cents, up 9.5% year over year.

Telefonica SA Price, Consensus and EPS Surprise

 

Telefonica SA Price, Consensus and EPS Surprise | Telefonica SA Quote

Telefonica registered revenues of €12,754 million (roughly $14,983 million) in the reported quarter, increasing 2.7% year over year.

Operating income before depreciation and amortization (OIBDA) came in at €4,095 million ($4,811.6 million), declining 1.9% year over year. Quarterly OIBDA margin was 32.1% compared with 31.9% in the year-ago quarter. Operating income was €1,773 million (around $2,083.3 million) in the reported quarter, reflecting an increase of 3.2% year over year.

Segmental Detail

Telefonica Latin America:  Revenues in Brazil decreased 0.5% on a reported basis but increased 1.2% on an organic basis to €2,935 million ($3,448.6 million). In the Hispano-American markets, revenues declined 4.7% on a reported basis but grew 16.1% on an organic basis to €2,981 million ($3,502.7 million). OIBDA margin in Brazil and the Hispano-American markets was 34.9% and 29.6% compared with the year-ago figures of 33.2% and 31%, respectively. In Brazil, Telefonica operates through its subsidiary Telefonica Brasil SA VIV.

Telefonica Europe:  In Spain, revenues decreased 0.3% on both a reported basis and an organic basis to €3,184 million (approximately $3,741.2 million). OIBDA margin in Spain was 41% compared with 42.3% in the year-ago quarter.

Revenues from Telefonica Deutschland dipped 1.3% to €1,850 million ($2,173.8 million) on both reported and organic basis. OIBDA margin in Deutschland was 24.7% compared with 24.3% in the year-ago quarter.

Revenues from Telefonica UK were down 4.4% on reported basis but increased 1.1% on organic basis to €1,602 million ($1,882.4 million). OIBDA margin in the UK was 25.7% compared with 27.3% in the year-ago quarter.

Telixus revenues were €177 million (about $208 million), up 5.3% on a reported basis and 7.5% on an organic basis.  

Subscriber Statistics

As of Sep 30, 2017, total customer access lines were approximately 339.8431 million, down 1.2% year over year. Notably, in the Latin American markets, Telefonica competes with large global telecom operators like AT&T, Inc. T and America Movil S.A.B. de C.V. AMX. While Telefonica and AT&T currently carry a Zacks Rank #4 (Sell), America Movil carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

On a year-over-year basis, mobile access decreased 0.8% to 272.7427 million customers. Total Internet and data access dropped 0.2% to 21.6967 million users. Pay-TV access totaled 8.3758 million, down 0.2% year over year. LTE customer count was 88.9787 million, surging 55.2% year over year, and representing 34.6% of total mobile accesses. FTTx/cable access was 10.5118 million, up a substantial 20.8% year over year. Broadband access was 21.2438 million, inching down 0.1% year over year.

Liquidity and Cash Flow

Telefonica ended the third quarter of 2017 with cash and cash equivalents of €3,696 million (around $4,342.8 million) compared with €3,736 million (roughly $4,034.9 million) at the end of 2016. The company exited the reported quarter with a total debt of about €57,408 million (about $67,454.4 million) compared with €74,554 million ($80,518 million) recorded at the end of 2016.

In the first nine months of 2017, Telefonica generated €11,898 million (around $13,980.2 million) of cash from operations, increasing 4.3% year over year. Free cash flow in the reported period was €3,068 million (approximately $3,604.9 million), surging 48% year over year.

Outlook for 2017

Telefonica expects revenues to grow more than 1.5% year over year. OIBDA margin will expand 0.01% and capital expenditure will be around 16% of total revenue.

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