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BT Q1 earnings: what’s the outlook for the share price?

It promises to be another gloomy quarter for BT, as the group struggles with major challenges and the shares sit close to ten-year lows.

BT Source: Bloomberg

When is BT’s earnings date?

BT reports first-quarter (Q1) results on 31 July, covering the first three months of its financial year.

BT earnings: what does the City expect?

BT is expected to report net income of £369.6 million, down 26.8% from a year earlier, while revenue Is forecast to fall 7.2% to £5.22 billion.

BT faces two huge challenges; declining profitability and an enormous pension deficit. It faces the problem of having to invest in infrastructure to provide high-quality services to UK consumers and businesses, but in an increasingly competitive environment, while at the same time having to put more money into a pension deficit that now tops £5 billion.

BT has been a dire investment for UK investors for many years, with an 80% drop in its valuation and no sign of a rebound in sight. It is cheap, at around 5.6 times earnings, but it has been this cheap for a long time and is definitely a bargain share for a reason. Value stocks might be good for the long run, but BT has little hope of recovering while it faces so many significant problems.

How to trade BT’s earnings

BT’s earnings on 7 May saw the shares drop by over 8%, briefly touching their lowest level in a decade. The average move on results day is 5.2%. Of the 23 analysts covering the group, 13 have ‘buy’ recommendations on the shares, with eight ‘holds’ and just two ‘sells’. The median target price is 162.8p, a premium of 48% to the current market price.

BT share price: technical analysis

Rallies continue to be sold here, the post-annual results rally saw the shares gain 30%, but this did not last and most of the gains have been given back. While losses were contained at 106p, recent price action saw the bounce from this level fade at 116p, creating a lower high. Further losses below 106p target 101p and then 98p.

BT chart Source: ProRealTime
BT chart Source: ProRealTime

BT still firmly out of favour

There is very little in BT’s fundamental and technical outlook that can inspire confidence. The group has underperformed the FTSE 100 for years, and has been left out of even the modest rebound in the index since March. With no dividend and a darkening outlook for earnings the shares are unlikely to offer much upside, and may continue to be a playground for short sellers.

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.

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