The Motley Fool

Should You Buy BT Group plc After Mixed Update?

Today’s third quarter results from BT (LSE: BT-A) (NYSE: BT.US) have been overshadowed somewhat by the announcement of the company’s pension plan arrangements. In fact, the triennial review of its pension scheme means that BT will pay down its increasing pension deficit by contributing £2 billion to the scheme over the next three years. This, it is hoped, will reduce the deficit from the now £7 billion, with it having risen from £3.9 billion in 2012 largely as a function of lower interest rates and quantitative easing.

While £2 billion over three years is a vast amount, it is less than the £2.6 billion that the company has spent trying to reduce its deficit in the last three years. And, while a significant amount, it is generally in-line with market expectations and, as a result, shares in BT are trading in line with the wider market, being down 1% today.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

Third Quarter Results

The agreement regarding pension plan arrangements means that BT will now focus on investing in its fibre broadband network, where it anticipates being able to deliver speeds of up to 500 Mb across most of the UK within the next decade. This seems to be a sensible strategy, since the third quarter of the current year was BT’s best ever for fibre broadband new additions. This helped to push BT’s earnings up by an impressive 10% versus the same quarter of last year and, in the nine months to 31 December, the company’s free cash flow is £459m higher than in the corresponding period last year.

However, BT has also reported a decline in revenue for the quarter of 3%, which means that its top line is down 2% for the first nine months of the year. This lack of revenue growth may cause concern for many investors, since the company’s cost base is likely to rise moving forward, as it invests in its fibre network and also in sports rights for its pay-tv offering. As such, a falling top line could cause the company’s profitability to be squeezed over the medium to long term.

Looking Ahead

Despite this, BT continues to have a bright future. Certainly, its pension liability is an unwelcome challenge, but this seems to be priced in to its current share price, with BT trading on a price to earnings (P/E) ratio of 14.5 while the FTSE 100 has a P/E ratio of 15.9. And, looking ahead, BT is forecast to increase its bottom line by 5% next year and by a further 8% in the following year. Therefore, it seems to offer good value for money and, with market sentiment likely to improve now that its triennial pension valuation has been completed, it could be a good time to buy a slice of BT.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US $12.3 TRILLION out of thin air…

And if you click here, we’ll show you something that could be key to unlocking 5G’s full potential...

It’s just ONE innovation from a little-known US company that has quietly spent years preparing for this exact moment…

But you need to get in before the crowd catches onto this ‘sleeping giant’.

Click here to learn more.

Peter Stephens has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

The renowned analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply enter your email address below to discover how you can take advantage of this.

I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement.