Hopes of recovery have driven BT Group (LSE:BT.A) shares sharply higher in the past year. Up 28% on a 12-month basis, the telecoms giant’s risen, in part on expectations that interest rate cuts will prompt a turnaround.
However, the release of latest financials on Thursday (30 January) has reminded investors of the severe challenges it continues to face. Following the trading statement, it was the FTSE 100‘s third-worst-performing share on the day.
Is this just a blip in BT’s recent share price recovery though? And should investors consider buying BT shares for their portfolios?
Recovery expected
A series of setbacks have kept BT under pressure for around a decade. These range from rising competition across its product segments, tough economic conditions, regulatory issues, and the high costs of its fibre rollout programme.
As a result, it’s reported whopping earnings drops in four of the past five years. But while City brokers predict another bottom-line reversal this fiscal year, they expect BT to begin a tentative recovery from the new financial year, beginning in April.
| Year To March | Predicted EPS | Annual growth | P/E ratio |
|---|---|---|---|
| 2025 | 17.83p | -4% | 8.1 times |
| 2026 | 18.06p | +1% | 8 times |
| 2027 | 18.82p | +4% | 7.7 times |
How realistic are these forecasts? Many people — myself included — aren’t exactly convinced following third-quarter trading numbers last week.
Another weak update
BT’s fresh update showed adjusted revenues down another 3% between October and December, to £5.2bn. This was caused by continued weakness at its Consumer and Business units, where corresponding revenues both dropped 2%.
Combined, these units make up 86% of group sales. At Consumer, poor smartphone demand damaged the top line, while revenues elsewhere dipped due to weak trading overseas.
In better news, Openreach recorded a 1% revenues improvement over the quarter. Turnover rose as BT’s infrastructure arm added a record 472,000 customers to its full-fibre network in the December quarter.
On another positive note, adjusted EBITDA rose 4%, to £2.1bn, in part due to ongoing cost-reduction measures. BT slashed its total workforce by 3% between April and December, to 117,000. It also managed to trim energy costs by the same percentage.
Tough times ahead?
On balance though, BT gave the market little to celebrate with last week’s update. Further cost-cutting and moves to become a more UK-centric business could help earnings. But the outlook still remains pretty bleak, in my opinion.
The major issues that have dogged it since the mid-2010s remain very much in play. And it continues to creak under massive debt, casting a shadow over future growth and dividends.
Net debt rose to £20.3bn as of September, due largely to its expensive fibre rollout programme and extra contributions to its pension scheme.
While it’s up more than a quarter since early 2024, at 143.9p, BT’s share price is still a long way from the 417.9p it was trading at 10 years ago. Given that the firm continues to struggle with the same challenges, I think it’s in danger of plunging again before too long.
Despite its low price-to-earnings (P/E) ratio of around 8 times, this is a FTSE 100 share I’m not even touching with a bargepole.
