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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 first-quarter 2017 financial numbers on May 11.
Last quarter, TELUS posted a negative earnings surprise of 13.04%. The company’s earnings lagged the Zacks Consensus Estimate in three of the previous four quarters, with an average negative surprise of 3.27%.
Shares of TELUS returned 1.3% but failed to beat the Zacks categorized Diversified Communication Services industry’s gain of 7.8% over the past three months.
Let’s see how things are shaping up for this announcement.
Factors at Play
TELUS consistently faces fierce competition 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 segment is threatened by cable TV operators such as Shaw Communications and requires capital investments in broadband infrastructure.
In the fourth quarter of 2016, TELUS generated approximately $549 million from operations, down 15.9% year over year. Free cash flow, in the said quarter was a negative $143.3 million compared with a positive $148 million in the year-ago quarter. We hope the company recovers from the negative cash flow and succeeds in generating more cash from operating activities in the to-be reported quarter.
We are impressed with TELUS’ Internet of things (IoT) plans and new tie-ups. TELUS has 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’s investments in various projects to expand and strengthen its fiber-optics network services and wireless services businesses bode well. The company is also focusing on its PureFibre network business.
TELUS 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. We believe such efforts drive a balanced growth for TELUS’ wireless and wireline businesses, in terms of revenue growth and subscriber addition. In the last reported fourth-quarter of 2016, wireless revenues rose 3.7% year over year to $1,392 million and wireline revenues inched up 1.7% year over year to $1,136.3 million. As of Dec 31, 2016, TELUS had 8.585 million wireless subscribers, up 1.5% year over year. Net wireless subscriber gain in the reported quarter was 78,000. The uptrend is expected to continue in the to-be reported quarter.
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 -5.88%. This is because the Most Accurate estimate stands at 48 cents while the Zacks Consensus Estimate is pegged at 51 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.
Here is a company in the Zacks categorized broader Utilities sector, which houses TELUS and has the right components to deliver earnings beat this quarter.
While we are happy to share many articles like this on the website, our best recommendations and most in-depth research are not available to the public.
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Will TELUS (TU) Disappoint Investors this Earnings Season?
Leading Canadian telecom operator TELUS Corp. (TU - Free Report) is slated to report first-quarter 2017 financial numbers on May 11.
Last quarter, TELUS posted a negative earnings surprise of 13.04%. The company’s earnings lagged the Zacks Consensus Estimate in three of the previous four quarters, with an average negative surprise of 3.27%.
Shares of TELUS returned 1.3% but failed to beat the Zacks categorized Diversified Communication Services industry’s gain of 7.8% over the past three months.
Let’s see how things are shaping up for this announcement.
Factors at Play
TELUS consistently faces fierce competition 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 segment is threatened by cable TV operators such as Shaw Communications and requires capital investments in broadband infrastructure.
In the fourth quarter of 2016, TELUS generated approximately $549 million from operations, down 15.9% year over year. Free cash flow, in the said quarter was a negative $143.3 million compared with a positive $148 million in the year-ago quarter. We hope the company recovers from the negative cash flow and succeeds in generating more cash from operating activities in the to-be reported quarter.
We are impressed with TELUS’ Internet of things (IoT) plans and new tie-ups. TELUS has 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’s investments in various projects to expand and strengthen its fiber-optics network services and wireless services businesses bode well. The company is also focusing on its PureFibre network business.
TELUS 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. We believe such efforts drive a balanced growth for TELUS’ wireless and wireline businesses, in terms of revenue growth and subscriber addition. In the last reported fourth-quarter of 2016, wireless revenues rose 3.7% year over year to $1,392 million and wireline revenues inched up 1.7% year over year to $1,136.3 million. As of Dec 31, 2016, TELUS had 8.585 million wireless subscribers, up 1.5% year over year. Net wireless subscriber gain in the reported quarter was 78,000. The uptrend is expected to continue in the to-be reported quarter.
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 -5.88%. This is because the Most Accurate estimate stands at 48 cents while the Zacks Consensus Estimate is pegged at 51 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
Key Pick
Here is a company in the Zacks categorized broader Utilities sector, which houses TELUS and has the right components to deliver earnings beat this quarter.
Pattern Energy Group Inc. has an Earnings ESP of +250.00% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here. The company will report first-quarter 2017 results on May 9.
Zacks’ Best Private Investment Ideas
While we are happy to share many articles like this on the website, our best recommendations and most in-depth research are not available to the public.
Starting today, for the next month, you can follow all Zacks' private buys and sells in real time. Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Click here for Zacks' private trades >>