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BT Group PLC BT.A

Morningstar Rating
GBX 139.55 +4.55 (3.37%)
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Company Report

BT Earnings: Investors Welcome Medium-Term Outlook; Maintaining Fair Value Estimate

Although BT’s full-year results fell short of consensus expectations, the market welcomed increased medium-term free cash flow guidance and shares climbed 9% in early trading on May 16. BT expects “normalized” free cash flow of GBP 1.5 billion, GBP 2.0 billion, and GBP 3.0 billion in fiscal 2025, 2027, and 2030, respectively, compared with GBP 1.3 billion this year. The increase will come from lower capital expenditure once Openreach’s fiber-to-the-home rollout nears completion as well as strong cost reductions, given BT plans to reduce its staff from 120,000 currently to 75,000-90,000 by the end of the decade. The board also approved a 3.9% dividend increase to GBX 8 per share, which we see as maintainable with the possibility of growing in the future. We maintain our GBX 200 fair value estimate, and shares remain undervalued.

Price vs Fair Value

BT.A is trading at a 154% premium.
Price
GBX 139.55
Fair Value
GBX 484.00
Uncertainty
High
1-Star Price
GBX 958.00
5-Star Price
GBX 348.00
Economic Moat
Xftmyj
Capital Allocation
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Bulls Say, Bears Say

Bulls

The relationship with regulator Ofcom seems to have improved since 2019, which should signal reduced regulatory intervention and give BT more certainty that it can generate excess returns for the next decade.

Bears

BT has a significant net pension obligation of GBP 3.1 billion as of 2023. Given the size of gross obligations, small changes in accounting assumptions can have a big impact on the size of this burden.

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News

Trading Information

Previous Close Price
GBX 135.00
Day Range
GBX 134.95139.62
52-Week Range
GBX 101.70139.62
Bid/Ask
GBX 127.00 / GBX 139.90
Market Cap
GBX 1.36 Tril
Volume/Avg
53.4 Mil / 37.9 Mil

Key Statistics

Price/Earnings (Normalized)
7.12
Price/Sales
0.67
Dividend Yield (Trailing)
5.52%
Dividend Yield (Forward)
5.52%
Total Yield
6.07%

Company Profile

BT Group is the incumbent telecommunications operator in the U.K. It is the owner of Openreach, the largest fixed-line network in the U.K. Openreach operates as a separate entity due to regulatory requirements but is still 100% owned by BT. Since 2020, Openreach has accelerated its fiber investments and expects to have 90% of the U.K. covered with FTTH by 2026. In the consumer division, BT has approximately 30% market share in broadband and mobile services. The enterprise segment serves large corporations while the global services division provides communications consultancy services.
Sector
Communication Services
Industry
Telecom Services
Stock Style Box
Large Value
Total Number of Employees
91,700

Competitors

Valuation

Metric
BT.A
00001
VOD
Price/Earnings (Normalized)
7.126.4310.80
Price/Book Value
1.090.260.37
Price/Sales
0.670.510.60
Price/Cash Flow
2.072.382.00
Price/Earnings
BT.A
00001
VOD

Financial Strength

Metric
BT.A
00001
VOD
Quick Ratio
0.730.990.57
Current Ratio
0.891.251.31
Interest Coverage
1.873.801.45
Quick Ratio
BT.A
00001
VOD

Profitability

Metric
BT.A
00001
VOD
Return on Assets (Normalized)
3.45%3.97%1.37%
Return on Equity (Normalized)
13.41%8.58%3.34%
Return on Invested Capital (Normalized)
6.68%5.60%3.53%
Return on Assets
BT.A
00001
VOD
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