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TELUS Corporation (TU - Free Report) reported impressive second-quarter 2021 results, wherein the bottom line matched the Zacks Consensus Estimate while the top line surpassed the same. Diligent operational execution, expanded service offerings, new customer wins, higher PureFibre network adoption and accelerated broadband network investment program boosted TELUS’ quarterly results. Shares of Canada-based telco inched up 0.5% to close the trading session at $22.20 on Jul 30.
Net Income
Net income attributable to common shares in the June quarter jumped 15.5% year over year to C$335 million or C$0.25 per share. The year-over-year improvement was driven by higher EBITDA and lower income tax expense. However, it was partly offset by increased depreciation and amortization charges.
Quarterly adjusted net income was C$348 million or C$0.26 per share ($283.3 million or 21 cents per share) compared with C$316 million or C$0.25 per share in the prior-year quarter. The bottom line matched the Zacks Consensus Estimate.
TELUS Corporation Price, Consensus and EPS Surprise
Encouraged by its business resiliency post the COVID-19 mayhem, quarterly total operating revenues jumped 10.3% year over year to C$4,111 million ($3,347 million). The growth reflects higher demand for premium bundled services that resulted in 223,000 new customer additions in the reported quarter.
Robust asset mix focused on technology-oriented verticals with best-in-class digital capabilities and superior service offerings across wireless and fibre broadband networks acted as key driving factors. Also, accelerated broadband build, augmented fiber footprint, copper-to-fiber migrations supported by disciplined cost controlling measures continue to spur its operating momentum and long-term profitability. The top line surpassed the consensus estimate of $3,282 million.
Quarterly Segment Results
TELUS reports its revenues in two segments — TELUS technology solutions (TTech) and Digitally-led customer experiences – TELUS International (DLCX).
In the second quarter, TELUS technology solutions (TTech) revenues increased 10.6% year over year to C$3,566 million, primarily driven by higher mobile network revenues followed by solid performance across mobile and fixed equipment, fixed data services and health services. However, it was moderately offset by a decline in fixed voice services revenues. Mobile network revenues rose 3.7% to C$1,526 million due to increasing mobile phone ARPU supported by a 6.2% growth in the mobile phones and connected devices subscriber base.
Fixed voice services declined 9.3% to C$214 million compared with C$236 million in the year-ago period. This reflects the ongoing decline in legacy voice revenues from technological substitution accompanied with greater use of long-distance plans and price plan changes. Health services soared 25.7% to C$127 million, driven by the positive impact of business acquisitions, increased in-clinic services in reopened TELUS Health Care Centers, growth in health benefits management services. This was further fueled by higher revenues from the continued adoption of virtual care solutions.
The segment’s adjusted EBITDA of C$1,353 million increased 7.4% over the same period a year ago, led by higher revenues from mobile, and fixed products and services along with the non-recurrence of COVID19-related provisions. However, adjusted EBITDA margin came in at 37.9% compared with 39.1% in the year-ago quarter. Capital expenditures increased 21.3% to C$882 million.
Revenues from Digitally-led customer experiences – TELUS International (DLCX) improved 7.5% year over year to C$658 million. Operating revenues (arising from contracts with customers) soared 25.9% to C$550 million, primarily driven by business acquisitions along with organic growth in customers.
The segment’s adjusted EBITDA of C$137 million rallied 35.6% from the year-ago quarter’s figure. Adjusted EBITDA margin was 20.9% compared with 18.6% in the prior-year quarter. Capital expenditures were up 6.9% to C$31 million.
TELUS PureFibre network covered nearly 2.6 million premises at the end of second-quarter 2021, up from 2.3 million premises in the year-ago quarter.
Other Details
EBITDA was C$1,451 million, up 6.8% year over year, driven by higher Internet and third wave data service margins, higher fixed data service margins from accretive subscriber base, growth in mobile equipment margins, non-recurrence of the comparative period’s COVID-19-related provisions, improved cost efficiency programs and increased contribution from TELUS International segment. Positive impact from business acquisitions was a driving factor as well. Adjusted EBITDA increased 9.5% year over year to C$1,490 million. Capital expenditures soared 20.8% to C$913 million on the back of increased 5G investments, fast-tracked investments in broadband build to increase system capacity and higher purchase of equipment to support subscriber growth.
Cash Flow & Liquidity
In the first six months of 2021, TELUS generated C$2,189 million of cash from operating activities compared with C$2,639 million in the year-ago period. Free cash flow for the same period plunged 49.7% to C$531 million. As of Jun 30, 2021, the company had C$2,183 million ($1,760.9 million) of net cash and temporary investments with C$18,019 million ($14,535 million) of long-term debt.
2021 Outlook Reiterated
For 2021, TELUS expects to continue generating positive financial outcomes and strong customer growth. The company expects revenue growth of up to 10% year over year. Adjusted EBITDA growth is projected of up to 8%. Further, TELUS’ investment in 3500 MHz wireless spectrum enables it to deliver transformational, next-gen 5G connectivity.
This, in turn, will help in enhancing its competitive positioning to drive strong profitable customer growth supported by consistent strategic execution, healthy balance sheet, strong cash flow outlook and customer service leadership position. The company is focused on its long-standing dividend growth program and expects to strengthen its financial and operational performance. It also remains committed to supporting its $1.5 billion accelerated broadband expansion program through 2022 on the back of an augmented Canadian market footprint.
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TELUS (TU) Q2 Earnings Meet, Revenues Surpass Estimates
TELUS Corporation (TU - Free Report) reported impressive second-quarter 2021 results, wherein the bottom line matched the Zacks Consensus Estimate while the top line surpassed the same. Diligent operational execution, expanded service offerings, new customer wins, higher PureFibre network adoption and accelerated broadband network investment program boosted TELUS’ quarterly results. Shares of Canada-based telco inched up 0.5% to close the trading session at $22.20 on Jul 30.
Net Income
Net income attributable to common shares in the June quarter jumped 15.5% year over year to C$335 million or C$0.25 per share. The year-over-year improvement was driven by higher EBITDA and lower income tax expense. However, it was partly offset by increased depreciation and amortization charges.
Quarterly adjusted net income was C$348 million or C$0.26 per share ($283.3 million or 21 cents per share) compared with C$316 million or C$0.25 per share in the prior-year quarter. The bottom line matched the Zacks Consensus Estimate.
TELUS Corporation Price, Consensus and EPS Surprise
TELUS Corporation price-consensus-eps-surprise-chart | TELUS Corporation Quote
Revenues
Encouraged by its business resiliency post the COVID-19 mayhem, quarterly total operating revenues jumped 10.3% year over year to C$4,111 million ($3,347 million). The growth reflects higher demand for premium bundled services that resulted in 223,000 new customer additions in the reported quarter.
Robust asset mix focused on technology-oriented verticals with best-in-class digital capabilities and superior service offerings across wireless and fibre broadband networks acted as key driving factors. Also, accelerated broadband build, augmented fiber footprint, copper-to-fiber migrations supported by disciplined cost controlling measures continue to spur its operating momentum and long-term profitability. The top line surpassed the consensus estimate of $3,282 million.
Quarterly Segment Results
TELUS reports its revenues in two segments — TELUS technology solutions (TTech) and Digitally-led customer experiences – TELUS International (DLCX).
In the second quarter, TELUS technology solutions (TTech) revenues increased 10.6% year over year to C$3,566 million, primarily driven by higher mobile network revenues followed by solid performance across mobile and fixed equipment, fixed data services and health services. However, it was moderately offset by a decline in fixed voice services revenues. Mobile network revenues rose 3.7% to C$1,526 million due to increasing mobile phone ARPU supported by a 6.2% growth in the mobile phones and connected devices subscriber base.
Fixed voice services declined 9.3% to C$214 million compared with C$236 million in the year-ago period. This reflects the ongoing decline in legacy voice revenues from technological substitution accompanied with greater use of long-distance plans and price plan changes. Health services soared 25.7% to C$127 million, driven by the positive impact of business acquisitions, increased in-clinic services in reopened TELUS Health Care Centers, growth in health benefits management services. This was further fueled by higher revenues from the continued adoption of virtual care solutions.
The segment’s adjusted EBITDA of C$1,353 million increased 7.4% over the same period a year ago, led by higher revenues from mobile, and fixed products and services along with the non-recurrence of COVID19-related provisions. However, adjusted EBITDA margin came in at 37.9% compared with 39.1% in the year-ago quarter. Capital expenditures increased 21.3% to C$882 million.
Revenues from Digitally-led customer experiences – TELUS International (DLCX) improved 7.5% year over year to C$658 million. Operating revenues (arising from contracts with customers) soared 25.9% to C$550 million, primarily driven by business acquisitions along with organic growth in customers.
The segment’s adjusted EBITDA of C$137 million rallied 35.6% from the year-ago quarter’s figure. Adjusted EBITDA margin was 20.9% compared with 18.6% in the prior-year quarter. Capital expenditures were up 6.9% to C$31 million.
TELUS PureFibre network covered nearly 2.6 million premises at the end of second-quarter 2021, up from 2.3 million premises in the year-ago quarter.
Other Details
EBITDA was C$1,451 million, up 6.8% year over year, driven by higher Internet and third wave data service margins, higher fixed data service margins from accretive subscriber base, growth in mobile equipment margins, non-recurrence of the comparative period’s COVID-19-related provisions, improved cost efficiency programs and increased contribution from TELUS International segment. Positive impact from business acquisitions was a driving factor as well. Adjusted EBITDA increased 9.5% year over year to C$1,490 million. Capital expenditures soared 20.8% to C$913 million on the back of increased 5G investments, fast-tracked investments in broadband build to increase system capacity and higher purchase of equipment to support subscriber growth.
Cash Flow & Liquidity
In the first six months of 2021, TELUS generated C$2,189 million of cash from operating activities compared with C$2,639 million in the year-ago period. Free cash flow for the same period plunged 49.7% to C$531 million. As of Jun 30, 2021, the company had C$2,183 million ($1,760.9 million) of net cash and temporary investments with C$18,019 million ($14,535 million) of long-term debt.
2021 Outlook Reiterated
For 2021, TELUS expects to continue generating positive financial outcomes and strong customer growth. The company expects revenue growth of up to 10% year over year. Adjusted EBITDA growth is projected of up to 8%. Further, TELUS’ investment in 3500 MHz wireless spectrum enables it to deliver transformational, next-gen 5G connectivity.
This, in turn, will help in enhancing its competitive positioning to drive strong profitable customer growth supported by consistent strategic execution, healthy balance sheet, strong cash flow outlook and customer service leadership position. The company is focused on its long-standing dividend growth program and expects to strengthen its financial and operational performance. It also remains committed to supporting its $1.5 billion accelerated broadband expansion program through 2022 on the back of an augmented Canadian market footprint.
Zacks Rank & Stocks to Consider
TELUS currently has a Zacks Rank #3 (Hold).
A few better-ranked stocks in the broader industry are UGI Corporation (UGI - Free Report) , MDU Resources Group, Inc. (MDU - Free Report) and Atmos Energy Corporation (ATO - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
UGI delivered a trailing four-quarter earnings surprise of 58.2%, on average.
MDU Resources delivered a trailing four-quarter earnings surprise of 30%, on average.
Atmos Energy delivered a trailing four-quarter earnings surprise of 6.6%, on average.
Conversion rate used:
C$1 = $0.813942 (period average from Apr 1, 2021 to Jun 30, 2021)
C$1 = $0.806649 (as of Jun 30, 2021)