Telefonica (TEF) Q1 Earnings and Revenue Down Year-over-Year


Telefonica, SA. TEF reported net profit of 706 million euros in the first quarter of 2022, down 20.3% year-on-year. Additionally, adjusted earnings per share were €0.12 (14 cents) compared to €0.14 (22 cents) in the prior year quarter.

Quarterly total revenue decreased 9% year-over-year to €9,410 million ($10,558.4 million). However, organic revenue (comprising 50% of results from the Virgin Media O2 joint venture) was up 3.2% year-over-year.

Telefonica SA, Consensus and EPS Surprise Awards

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Results by Business Units

Telefonica España: Quarterly revenue in Spain increased 0.9% year-on-year on a reported basis to €3,079 million. This was due to growth in service revenues due to the increase in APRU as well as growth in handset sales. The quarterly OIBDA margin fell to 36.9% from 39.2% in the prior year quarter. Capital expenditure (CapEx) increased by 11.5% to 296 million euros during the quarter.

Telefonica Deutschland: Quarterly revenue increased by 5.2% to 1,946 million euros. The improvement was driven by the strength of the core business and strong customer demand for the O2 Free wallet, which boosted the contracted mobile base. OIBDA’s quarterly margin was 31.3% versus 30.1% in the prior year quarter, reflecting operational inefficiencies. CapEx increased by 16.1% to €265 million during the quarter.

VirginMedia-O2 United Kingdom: Quarterly revenue for this newly formed segment increased by 4.3% to 2,989 million euros, fueled by improving mobile trends. Strong mobile phone revenues and rising cell phone prices drove the segment’s performance in the quarter. However, it was partly offset by weak B2B revenue. The quarterly OIBDA margin increased to 36.8% from 36% in the prior year quarter. CapEx decreased by 41.9% to 606 million euros during the quarter.

Telefonica Brasil: Quarterly revenues in Brazil increased by 18.1% to 1,942 million euros mainly thanks to growth in fixed revenues and services. The quarterly OIBDA margin decreased to 41.4% from 42.7% in the prior year quarter. CapEx jumped 9.7% to 323 million euros during the quarter.

Telefónica Infra (Telxius): TEF continued to add value to its entire portfolio in the first quarter and completed the first rounds of work on new fiber JVs. Negotiations have started with investors in the UK and Spain to deploy sustainable FTTH networks in underserved areas. Unsere Grüne Glasfaser owns more than a quarter of a million buildings in Germany which are covered by memorandums of understanding with municipalities. In Brazil, FiBrasil is on track to reach its deployment target, having exceeded 2.2 million premises in the first quarter.

In Chile, ONNET Fibra continued to roll out at a rapid pace, exceeding 200,000 additional premises and maintaining its leadership in the FBB market. Meanwhile, in Colombia, the KKR deal closed in January 2022 after securing all essential regulatory clearances, and the company aims to reach 4.3 million premises in three years.

Telefonica Tech: Revenue grew 80.6% year-on-year to €299 million, significantly above market. This was driven by strong performance across the business, as well as the integration of operations in 2021. The Cyber ​​business unit beat estimates, with double-digit IoT revenue growth in first trimester.

Telefonica Hispam: Quarterly revenue for this segment increased by 10.9% to 2,150 million euros, mainly driven by growth in all countries. The quarterly OIBDA margin was 27.8% compared to 20.4% in the prior year quarter. CapEx fell by 66.8% to 116 million euros during the quarter.

Other details

Quarterly OIBDA was €3,199 million, down 6.4% year-on-year. The operating result amounted to 1,090 million euros during the quarter under review compared to 1,394 million euros in the quarter of the previous year.

Cash flow and liquidity

During the quarter under review, Telefonica generated 2,003 million euros of net cash from operating activities, compared to 2,556 million euros a year ago. Free cash flow for the same period amounted to 513 million euros, which includes principal lease payments.

As of March 31, 2022, the company had €8,112 million in cash and cash equivalents, including €53,453 million in non-current financial liabilities.

Outlook 2022

The company expects to achieve low single-digit growth in revenue and OIBDA, as well as a CapEx-to-sales ratio of up to 15%.

In addition, the company announced a cash dividend of €0.30 per share for 2022, payable in December 2022 (€0.15 per share) and June 2023 (€0.15 per share). The company also announced the cancellation of shares representing 2.41% of the capital held in treasury.

Zacks Ranking and Stocks to Consider

Telefonica currently has a Zacks rank of #3 (Hold).

Some top-ranked stocks in the broader industry are EMB Energy EMB, RWE AG RWEOY and National Fuel Gas Company NFG. OGE, RWE and National Fuel currently sport a No. 1 Zacks rank (strong buy). You can see the full list of today’s Zacks #1 Rank stocks here.

The Zacks consensus estimate for OGE earnings in 2022 is pegged at $2.15 per share, unchanged for the past 60 days. The long-term earnings growth rate is expected to be 3.5%.

OGE shares have gained 14.9% over the past year.

The Zacks consensus estimate for RWE earnings in 2022 is pegged at $2.72 per share, up 12% over the past 60 days. The long-term earnings growth rate is expected to be 4.5%.

Shares of RWEOY have risen 6.8% over the past year.

The Zacks consensus estimate for National Fuel Gas earnings in 2022 is pegged at $5.97 per share, up 11.4% over the past 60 days. The long-term earnings growth rate is expected to be 10%.

National Fuel’s earnings have exceeded the Zacks consensus estimate for the past four quarters, averaging 9.9%. NFG shares have gained 29.4% over the past year.

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