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TELEFÓNICA: FY2019 RESULTS (ANÁLISIS BANCO SABADELL)

4Q'19 vs. 4Q'18 Results
Sales: € 12.4 Bn (-4.0% vs. -4.0% BS(e) and -4.6% consensus);
EBITDA: € 3.669 Bn (+3.7% vs. +14.6% BS(e) and +15.4% consensus);
EBIT: € 914.0 M (-14.4% vs. +28.7% BS(e) and +30.7% consensus);
Net Profit: € -202.0 M (€ 610.0 M in FY2018 vs. € 517.0 M BS(e) and € 512.0 M consensus);
FY2019 vs. FY2018 Results
Sales: € 48.423 Bn (-0.6% vs. -0.6% BS(e) and -0.7% consensus);
EBITDA: € 15.119 Bn (-2.9% vs. -0.4% BS(e) and -0.3% consensus);
EBIT: € 4.537 Bn (-30.4% vs. -23.4% BS(e) and -23.0% consensus);
Net Profit: € 1.142 Bn (-65.7% vs. -44.1% BS(e) and -44.3% consensus);

Results below expectations due to negative one-offs (€-239 M in Mexico from the operational transformation of the business and €-206 M from goodwill impairments in Argentina). Excluding these impacts, EBITDA would have beaten expectations, with organic growth in 4Q’19 of +4.0% (vs. +3.6% BS(e)), leaving 2019 with +1.9% growth (vs. +1.1% in 9M’19). NFD fell -8.1% in 2019 to € 37.74 Bn (€ 37 Bn including asset sales, 2.43x NFD/EBITDA), which would increase to € 45.1 Bn including the impact from IFRS16. Good performance in cash generation continues, with FCF’19 totalling € 5.91 Bn (+20.6%). As for the guidance given by the company, it points to stable revenues, EBITDA and EBITDA (vs. -0.8% and +1.7% in sales and EBITDA BS(e), respectively) in 2020, and sales growth (vs. +0.5% BS(e) CAGR’19-22) and +2pp growth in EBITDA-CAPEX on sales (vs. 2.3pp BS(e)) in 2022. The company has announced a dividend payment in 2020 of € 0.40/sh. (+0%, 6.4% yield), in line with expectations.
We stress the organic improvement of EBITDA seen in 2019 and the continued debt reduction (-8.1% on the year). As for the guidance unveiled, we believe it its somewhat conservative and with few surprises, and thus the market sentiment will depend on asset sales (infrastructures and TEF LatAm) for further debt reduction. We reiterate our BUY recommendation, as we foresee drivers in this regard and following the poor share price performance in the past year (around -10% in absolute terms and -20% vs. IBEX and -17% vs. sector). BUY, T.P. € 8.50/sh. (+29.97% upside).