Orange SA (ORAN) - Get Orange SA Sponsored ADR Report , France's largest telecoms company, rang up a planned dividend hike after narrowly beating analyst's full year earning expectations after posting a 1.3% increase in adjusted earnings of €12.7 billion ($13.4).
Paris-based Orange said net profit climbed to €2.94 billion over 2016, up from €2.65 billion in 2015, on sales of €40.92 billion, up from €40.24 billion, boosted by strong final quarter revenues in Spain, the group's second largest market.
Shares in the group rose around 1% to change hands at €14.68 each, extending their three month gain to around 7%. That compares to a 6.5% advance for the Stoxx Europe 600 Telecommunications index over the same period.
Orange had been expected to post a net operating profit of €12.65 billion, based on the average of analyst forecasts. The company said it will propose a dividend of €0.65 per share for 2017, up from €0.60 for 2016.
"We are reaping the benefits of our strategy of differentiation through investment and customer experience with the return to growth in our revenues and EBITDA," said Orange Chairman and CEO Stephane Richard. "The confirmation of improving trends allows us to consider a redistribution of the value created with a proposed increase in the dividend."
The strong results provide further evidence of the turning fortunes of European mobile operators after years of cost cutting amid falling margins in key markets, notably France where competition had undercut profitability for more than half a decade. Also on Thursday, Bouygues Telecom (BOUYF) , which Orange last year tried to buy for €10 billion, reported a €149 million operating profit up from an €11 million loss in 2015.
Orange's European sales momentum in the fourth quarter provided reason for particular optimism. Total sales in the fourth quarter rose 4.5% on the same period last year, following on from a 2.8% in the third quarter. Spain was the company's top performing market, posting revenue gains of 7.9% in Q4. Revenues in France, the company's largest market, fell 0.8% in Q4.
Orange said it expected its adjusted earnings to improve over 2017 lifted by sales growth and cost cutting. It also said it will continue to look at "selective, value-creating acquisitions" in markets in which it is already present.
Orange's momentum and guidance "should reassure investors confidence on Orange's ability to sustain top-line growth, particularly given management guides to domestic (French) revenues stabilizing this year," noted Goldman Sachs. "Management guidance has been beaten in recent years and we expect (analyst) consensus to rise through 2017."