BT Group Plc (BT/A), the U.K.’s biggest fixed-line phone company, fell the most in six months after Bank of America-Merrill Lynch said rising costs from plans to increase sales are endangering earnings growth.
BT fell 2.9 percent to 244.7 pence at 10:17 a.m. in London after the Bank of America analysts downgraded the stock to neutral from buy. The shares earlier fell as much as 3.2 percent, the biggest intra-day drop since July. The stock had gained 24 percent in the 12 months through yesterday.
BT is investing in a high-speed, fiber-optic Internet service to be rolled out across the U.K. and in the rights to sports programs and mobile spectrum as it combats a drop in revenue from traditional home-phone lines. Those projects alongside years of job reductions, which have left the company with little room to cut costs, will make it more difficult for BT to increase earnings, the analysts said.
Earnings before interest, taxes, depreciation and amortization will fall to 6.09 billion pounds ($9.57 billion) in the fiscal year ending in March from 6.19 billion pounds a year earlier, according to the average analyst estimate in a Bloomberg survey. Revenue will probably drop to 18.2 billion pounds from 19.3 billion pounds, according to the same poll.
BT’s decline came even as Societe Generale boosted its 12- month share-price prediction by 11 percent to 245 pence. The Bank of America analysts lowered their price target to 265 pence from 285 pence. Of the 27 analysts who share their recommendations with Bloomberg, 13 advocate buying BT shares, while 11 have a hold rating and three advise investors to sell.
The average of 21 analysts who give 12-month price predictions implies that BT shares will rise 5.3 percent in that period.
To contact the reporter on this story: Amy Thomson in London at firstname.lastname@example.org