Telefonica, S.A. (TEF – Free Report) reported a first-quarter 2023 net income of €298 million compared with €706 million in the year-ago quarter. Further, basic earnings per share were €0.04 compared with €0.11 per share in the prior-year quarter.
Quarterly total revenues increased 6.7% year over year to €10,045 million. Organic revenues (aggregating 50% of Virgin Media O2 joint venture results) grew 4.9% year over year to €11,497 million.
Results by Business Units
Telefonica Espana: Quarterly revenues in Spain increased 0.3% year over year on a reported basis to €3,088 million. This is due to momentum in service and retail revenues coupled with rising commercial activity and IT revenues, partly offset by lower wholesale revenues. The quarterly OIBDA margin was 36.1%. Capital expenditure (CapEx) on a reported basis increased 15.4% to €342 million in the quarter.
Telefonica Deutschland: Quarterly revenues rose 8% to €2,101 million. The improvement was driven by continued momentum in the mobile business owing to higher handset sales and growing traction for the O2 portfolio, partly offset by the accelerated MTR glidepath. The quarterly OIBDA margin was 29.5%. CapEx declined 7.2% to €246 million in the quarter.
VirginMedia-O2 U.K.: Quarterly revenues of this newly formed segment decreased 1.4% to €2,947 million due to a decline in fixed revenues, partly offset by a rise in mobile revenues. The quarterly OIBDA margin stood at 34.6%. CapEx decreased 5.8% to €571 million in the quarter.
Telefonica Brasil: Quarterly revenues in Brazil grew 17.5% to €2,282 million, mainly due to the momentum in digital services and the progressive update on tariffs. The quarterly OIBDA margin was 34.6%. CapEx declined 6.4% to €303 million in the quarter.
Telefonica Infra (Telxius): The pandemic-induced boost in traffic and the emergence of the new digital era had already helped the company in previous years; still, Telxius traffic in the first quarter increased 15% year over year.
In the first quarter, Telxius and América Móvil deployed Tikal (by Telxius), a new ultrahigh capacity subsea cable connecting Guatemala and the United States. In Spain, Bluevia has met 80% of its target fiber coverage of 5 million by 2024.
Telefonica Tech: Revenues increased 43.5% year over year to €429 million. This was driven by the robust performance of managed & professional services and own platforms. The Cyber business unit outperformed estimates, with first-quarter IoT revenues expanding by double digits.
Telefonica Hispam: Quarterly revenues in this segment increased 4.1% to €2,238 million, mainly due to favorable foreign currency movement. The quarterly OIBDA margin was 18.3%. CapEx has increased 10.5% to €128 million in the quarter.
Other Details
Quarterly OIBDA was €3,121 million, down 2.4% year over year. Operating income was €970 million in the quarter under review compared with €1,090 million in the prior-year quarter.
Cash Flow & Liquidity
For the year that ended Mar 31, 2023, Telefonica generated €2,301 million of net cash from operating activities compared with €2,003 million generated in the comparable period in the prior year. The free cash flow for the same period totaled €454 million, which includes principal payments of leases.
As of March 2023, the company had €7,337 million in cash and cash equivalents, with €33,978 million of non-current financial liabilities.
2023 Outlook
The company expects low-single-digit growth in revenues and OIBDA and a CapEx-to-sales ratio of up to 14%.
In addition, the company announced a cash dividend of €0.30 per share for 2023, payable on December 2023 (€0.15 per share) and June 2024 (€0.15 per share).
Zacks Rank & Other Stocks to Consider
Telefonica currently has a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the broader technology space are Dropbox (DBX – Free Report) , Badger Meter (BMI – Free Report) and Blackbaud (BLKB – Free Report) , each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Dropbox’s 2023 earnings has increased 4.8% in the past 60 days to $1.76 per share. The long-term earnings growth rate is anticipated to be 12.3%.
Dropbox’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 10.4%. Shares of DBX have increased 3.7% in the past year.
The Zacks Consensus Estimate for Badger Meter’s 2023 earnings has increased 4.7% in the past 60 days to $2.69 per share.
Badger Meter’s earnings beat the Zacks Consensus Estimate in all the last four quarters, the average being 5.3%. Shares of BMI have increased 77.5% in the past year.
The Zacks Consensus Estimate for Blackbaud’s 2023 earnings has increased 7.3% in the past 60 days to $3.68 per share.
Blackbaud’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average surprise being 10.4%. Shares of the company have increased 41.5% in the past year.
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