Orange Telecom (ORAN) is up 16% so far this year and recently had a yield around 7.4%. The European communications giant is delivering steady financial results and is on pace to reach its 2023 financial goals, which call for slight EBITDAL growth, lower capex, cash flows over €3.5 billion, net debt to EBITDAL around 2 times, and a €0.72 dividend, notes Philip MacKellar, editor of Contra the Herd.
In the latest half-year, performance in France and much of the rest of Europe has been strong, as average revenue per offer has improved. Overall sales increased €412 million, and net income rang in at €1.1 billion, versus €1.5 billion over the same period last year.
Capex was down nicely, and free cash flows were up. Credit ratings on Orange’s debt are unchanged, but Moody’s has improved its outlook from stable to positive. The company is working to become more sustainable and reduce carbon emissions, and issued an inaugural sustainability-linked bond for €500 million, which will help the enterprise reach net zero carbon by 2040 (allegedly).
At an oversubscription rate of five times— yes, five times — investors are clamoring to get these bonds. It’s a clear signal that prioritizing the Earth is becoming more desirable to investors.
In September, Orange added to its holdings in the healthcare sector, acquiring NEHS Digital and Xperis through its Enovacom subsidiary. The former specializes in medical imaging, while the latter concentrates on healthcare data interoperability.
These purchases build on Enovacom’s addition of Exelus, a leader in day-to-day telemedicine, in May 2022. With the global digital health market projected to expand at a CAGR in the double digits between now and 2030, these deals should be beneficial.
The European Commission is in “Phase II” of its investigation into the proposed tie-up between Orange and MásMóvil. ORAN’s staff is confident that this deal can be finalized by the end of 2023. That seems remarkably optimistic, and regulators could just as easily block or delay the process.
The corporation has a stable outlook, the business is far short of its potential, and it provides consistent dividend income. Orange remains a Buy.
Recommended Action: Buy ORAN.