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Will TELUS (TU) Disappoint Investors this Earnings Season?

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Leading Canadian telecom operator TELUS Corp. (TU - Free Report) , is slated to report fourth-quarter 2016 financial numbers, before market open, on Feb 9.

Last quarter, TELUS posted a negative earnings surprise of 1.96%. Moreover, the company’s earnings lagged the Zacks Consensus Estimate in two of the previous four quarters.

Further, shares of TELUS returned 4.02% compared with the Zacks categorized ‘Diversified Comm Services’ industry’s loss of 1.92% over the past three months.

Let’s see how things are shaping up for this announcement.

Factors at Play

TELUS continues to face fierce competition both in the wireless and wireline segment. In the wireless segment, it competes against Rogers Communications Inc. (RCI - Free Report) and BCE Inc.’s (BCE - Free Report) subsidiary Bell Canada followed by threats from small regional carriers like MTS in Manitoba and SaskTel in Saskatchewan. The wireline side is threatened by cable TV operators such as Shaw Communications and requires capital investments in broadband infrastructure.

However, we are impressed with TELUS’ IoT plans and new tie-ups. TELUS further continues to benefit from increased penetration of smartphones, higher average revenue per unit, accelerating wireless data services and an increasing number of wireline fiber optic networks. TELUS has also consolidated its foothold in the IoT market with the launch of the TELUS Global IoT Connectivity platform to support the expansion of its Canadian business enterprises. The company is also focusing on its PureFibre network business.

Earnings Whispers

Our proven model does not conclusively show that TELUS is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here as elaborated below.

Zacks ESP: TELUS has an Earnings ESP of -8.33%. This is because the Most Accurate estimate stands at 44 cents while the Zacks Consensus Estimate is pegged at 48 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: TELUS has a Zacks Rank #4 (Sell). 

Meanwhile, we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

TELUS Corporation Price and EPS Surprise

 

TELUS Corporation Price and EPS Surprise | TELUS Corporation Quote

Stock to Consider

Here is a company that has the right combination of elements to post an earnings beat this quarter.

Applied Optoelectronics, Inc. (AAOI - Free Report) is scheduled to release fourth-quarter 2016 financial results on Feb 23, 2017. Its earnings surpassed the Zacks Consensus Estimate in two of the previous four quarters, with an average beat of 106.74%. It currently has an Earnings ESP of +15.87% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

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