The outlook for BT Group plc (LON:BT.A) (BT.A.L) continues to be uncertain in my view. The company is seeking to make numerous changes to its business model after what has been a challenging few years. Although it has made encouraging progress according to its most recent update in terms of reducing headcount, it is still expected to record declining profitability in the next financial year.
This could keep investor sentiment pegged back in my opinion. Investors may be waiting for evidence that the company’s refreshed strategy is having a material impact on its financial performance. After all, the company has invested £billions in recent years on the acquisition of EE, as well as sports rights and its pay-tv offering. Yet its EPS has fallen for three successive years. As a result, investors may adopt a cautious stance on the stock in the near term – particularly after it has bucked the wider market trend and risen since May.
BT is set to have a new CEO in the next few weeks. I think this could help to catalyse its long-term performance, but may create a degree of instability in the near term. A new CEO could bring a further ‘unknown’ to the company, in terms of potential strategy and direction. While he may seek to maintain the status quo in terms of strategy, there may be further changes ahead that are aimed at improving the company’s financial performance.
Therefore, I feel there could be volatility ahead for the stock. Although I think that BT may have recovery potential in the long run since it has a P/E of around 10 and what appears to be a strong position in key markets, I believe that it may take time for it to deliver improving financial performance, as well as a recovery, after what have been a disappointing few years.