BCE's 2025 Results Show Continued Strain, 2026 Targets Highlight Turnaround Hurdles

What happened

BCE reported its 2025 Q4 and full-year results, revealing ongoing earnings compression and free cash flow volatility despite cost-cutting efforts. The company announced 2026 financial targets that aim for modest growth but are overshadowed by CRTC-mandated wholesale fibre access, which erodes broadband margins. High leverage persists with a net debt/EBITDA ratio of ~4.75x, constraining financial flexibility and increasing vulnerability to interest rate risks. Integration challenges with Ziply Fiber and structural decline in Bell Media add execution uncertainty to the turnaround narrative. Management's forward-looking statements in the news release warrant skepticism, given past overly optimistic assumptions that led to a 50% dividend cut in 2025.

Implication

The 2026 targets indicate management's attempt to stabilize the business, but they are contingent on navigating hostile regulatory environments and successful cost management. Regulatory outcomes on fibre wholesale pricing will critically impact BCE's cash flow generation and ability to reduce leverage over time. High debt levels and media headwinds limit upside potential, making the stock suitable only for patient, value-oriented investors with a high risk tolerance. Execution on Ziply Fiber integration and media restructuring is essential to de-risk the investment case and support any earnings recovery. While the stock trades at a ~39% discount to FCF-based DCF, this margin of safety is offset by persistent uncertainties, requiring cautious monitoring of quarterly performance against guidance.

Thesis delta

The core thesis remains unchanged: BCE is a potential buy for investors willing to underwrite regulatory and turnaround risks, but the new results and targets do not shift this view materially. However, achievement of 2026 targets could signal progress toward cash flow normalization, while failure would indicate deeper structural issues and potentially invalidate the buy case. No significant delta is warranted at this stage, as the key watch items—regulatory developments, FCF trajectory, and integration success—remain unresolved.