BT Q3 trading update to shed more light on the UK telecom giant’s strategy

​​​BT Q3 trading update to shed more light on the UK telecom giant’s strategy

​British telecoms giant BT is scheduled to release its third quarter (Q3) trading update on February 1, providing investors and analysts with an update on the company's financial performance. The upcoming statement arrives during a turbulent period for BT, as the company contends with economic and political uncertainty, high costs, and increased competition in the UK telecoms industry.

​Industry observers will be closely monitoring BT's Q3 metrics for signs of how the company is navigating challenging market conditions. Revenue growth, earnings, cash flow, and other key indicators will be scrutinized. Of particular interest will be BT's performance in its consumer division, as last year’s surging inflation has put household budgets under strain. Meanwhile, BT Business is expected to demonstrate resilience amid macroeconomic volatility.

​BT management also faces pressure to demonstrate progress on the company's ambitious cost savings targets. With energy, staffing, capital expenditure, and other costs remaining at elevated levels, BT is Executives will likely spotlight efficiency gains achieved in Q3 through supply chain improvements, digitization initiatives, and other levers.

​The upcoming statement follows BT's half-year results which were published in November and according to its Chief Executive Philip Jansen showed “predictable and consistent revenue and EBITDA growth” and that the telecoms company “strengthened [its] competitive position with the launch of both New EE and [the] renewed strategy in Business, and Openreach” which “built full fibre broadband to more than a third of the UK's homes and businesses with a growing connection rate.”

​According to the telecom behemoth’s CEO the “transformation programme has now delivered £2.5bn in annualised savings” on its way to its £3 billion target in savings by 2025 to protect profitability but for now the company still sits on a large debt pile, which currently sits at £20bn. Considering the market cap is just £11.3bn, it puts the scale of this debt into perspective. With interest rates in the UK having climbed to 5.25% throughout 2023, BT is expected to shell out hundreds of millions of pounds in additional interest repayments. This could harm its profitability moving forward until interest rates in the UK decrease.

​BT financial metrics

​BT shares currently offer an attractive investment opportunity with a low price-to-earnings (P/E) ratio and a high dividend yield. The P/E ratio of six indicates that the stock is undervalued compared to the average P/E ratio of the FTSE 100 which is around 14. This suggests that there may be potential for the stock price to increase in the future.

​The dividend yield of 6.7% is significantly higher than the UK market average and offers a better return than a savings account. Even if the stock price were to stay unchanged, the dividend income alone would provide a healthy passive income for an investor’s portfolio.

​It is important to note, though, that dividends are not guaranteed, but BT's current dividend coverage ratio indicates that the company has sufficient earnings to sustain its dividend payments. Furthermore, BT follows a progressive dividend policy, which means that it aims to increase its dividend payouts in the future.

​This potential for future dividend growth could provide solid returns for investors but the issue is the company’s share price which declined by close to 10% since the beginning of the year. This may either be seen by investors as an even better buying opportunity than at the end of last year or may put potential investors off.

​Analyst ratings for BT

​Refinitiv data shows a consensus analyst rating of between ‘buy’ and ‘hold’ for BT with 3 strong buy, 7 buy, 4 hold and 4 sell – and a mean of estimates suggesting a long-term price target of 179.56 pence for the share, roughly 59% higher than the current price (as of 31 January 2024).

​Technical outlook on the BT share price

​The BT share price is sliding towards its December 2022 to October 2023 lows at 110.55p to 109.40p which offer a good support zone where it may well level out before rising once more.

​BT Weekly Candlestick Chart

​Were the 109.40p October 2023 low to be fallen through on a daily chart closing basis, a more significant decline could take the BT share price all the way back to the March to October 2020 pandemic lows at 102.90p to 94.68p which represents major long-term support.

​For now the mid-January lows at 112.25p is being revisited but seems to offer at least short-term support, together with the early August to early-October 2022 lows at 111.95p to 111.10p.

​BT Daily Candlestick Chart

​Failure at 111.10p would likely engage the 109.40p late-October trough. Immediate resistance can be spotted at last week’s 117.25p high which needs to be exceeded on a weekly chart closing basis for any kind of potential upside momentum to gain traction.

​The medium-term trend will only be re-established ounce a rise and daily chart close above the December peak at 138.50p has been seen.