BT Group plc (LON:BT.A) (BT.A.L) is undergoing a period of significant change at the moment. The company is seeking to implement a revised strategy, which so far appears to be being delivered successfully in my opinion.
In the company’s most recent update it discussed headcount reductions that have already taken place. This could reduce its costs at a time when the quad play industry is becoming increasingly competitive. It may also produce a more flexible business that is able to compete more effectively with its industry peers.
However, BT’s strategy is set to now be implemented by a new CEO who starts work in that position within a matter of weeks. This could cause a degree of disruption in my view – particularly if there are further changes made to its strategy. Having sought to shift its focus to sports rights and mobile in recent years, investors may prove to be sceptical about further revisions to strategy after three years of falling EPS.
With the company expected to post further declines in EPS in the next two years, I believe it is still a long way from delivering a successful recovery from a financial standpoint. Its top and bottom-line growth in the most recent quarter was lacklustre compared to some of its industry peers, and this may keep the stock’s valuation pegged back in the near term in my opinion.
With BT having a P/E ratio of around 10, I believe it could offer recovery potential. It has a diverse range of services which could allow it to benefit from a competitive advantage. But with there still being question marks surrounding its ability to deliver consistent growth in EPS over a long period, I feel that it may take some time to fulfil its potential. As a result, I’m cautiously optimistic about its prospects in what is a volatile wider FTSE 100 index.