BT Sales Improve But Stock Still Overvalued say Analysts

BT's main revenue driver remains the consumer division, where revenue jumped 11% year over year, but analysts say the telecoms stock remains slightly overheated

Allan C. Nichols, CFA 1 February, 2016 | 2:58PM
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BT Group (BT.A) reported improved fiscal third-quarter results, but the nine-month figures remain in line with our full-year projections. We expect to maintain our fair value estimate and our narrow moat rating. The firm's revenue increased 3% in the quarter, but was flat through nine months versus our full-year projection of a slight decline, excluding the acquisition of EE, which closed on January 29.

BT actually added fewer broadband customers than its arch rival Sky

The main revenue driver remains the firm's consumer division, where revenue jumped 11% year over year. This was driven by a 23% increase in broadband and TV revenue and a 5% improvement in calls and lines. We are pleased to see good growth here, but remain sceptical regarding the return on the costs for sports and other programming driving this growth. We also think that BT's discussion of its broadband growth, while presumably technically correct, is misleading. The firm reported that it added 130,000 retail broadband customers, "representing 71% of the DSL and fibre broadband market net additions."

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
BT Group PLC142.00 GBX-0.87Rating

About Author

Allan C. Nichols, CFA  is a senior stock analyst and international investing specialist with Morningstar.