Source: Sharecast
Berenberg said BT's Q4 results themselves were not great, with revenue and underlying earnings both declining year-on-year and missing consensus, while normalised FCF only beat due to forward sales of copper.
"However, share prices are forward-, not backwards-looking, and BT's issuance of 2026/27 and end-of-decade guidance will drive meaningful increases to consensus normalised FCF, in our view," said Berenberg.
The German bank stated it may question "the longer-term wisdom" of having issued such guidance but, in the near term, it combines with other de-risking events through the rest of 2024 – like the UK general election and the move away from CPI-linked pricing – to create "an improving narrative" for BT's investment case.
"Seeing sentiment towards BT as building momentum from a low starting point, we keep our 'buy' recommendation and increase our price target to 155.0p," it said. "In the near term, BT trades in line on cash flows, but cheap on earnings – trading on a 2024/25E 7% normalised EFCF yield and 10x P/E (on reported EPS). However, by 2026/27E, BT looks cheap on both metrics, trading on a 9% normalised EFCF yield and 8x P/E."
Reporting by Iain Gilbert at Sharecast.com