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Telus (TU) Up 3% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Telus (TU - Free Report) . Shares have added about 3% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Telus due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

TELUS Q3 Earnings Beat Estimates, Revenues Increase Y/Y

TELUS reported healthy third-quarter 2018 results, wherein both the top line and the bottom line surpassed the respective Zacks Consensus Estimate.

Net Income

Net income for the quarter increased 10.1% year over year C$443 million or C$0.74 per share primarily driven by growth in operating revenues in both the operating segments.

Adjusted net income increased 6.7% year over year to C$445 million or C$0.74 per share ($340.4 million or 57 cents per share). The bottom line surpassed the Zacks Consensus Estimate by 3 cents.

Revenues

Quarterly operating revenues increased 10.9% year over year to C$3,774 million ($2,888 million), beating the Zacks Consensus Estimate of $2,717 million. The year-over-year increase was primarily driven by higher wireless network and equipment revenues, and wireline services revenue growth.

Other Quarter Details

EBITDA was C$1,349 million, up 8.2% year over year backed by higher wireless network revenues and wireline services revenue growth. Adjusted EBITDA increased 6.4% year over year to C$1,351 million. Adjusted EBITDA margin was 37.5% compared with 37.3% in the year-ago quarter.

Segmental Performance

Wireless operating revenues increased 8.5% year over year to C$2,161 million. Wireless network revenues increased 2.2% to C$1,547 million, largely driven by subscriber growth and a larger proportion of customers selecting plans with larger data buckets. Equipment and other service revenues were C$512 million, up 10.8% year over year, mainly due to higher postpaid gross additions and more high-valued smartphones in the sales mix. Adjusted EBITDA of C$912 million increased 6.8% from the prior-year quarter, reflecting network revenue growth driven by a larger customer base and an improvement in equipment margins. Adjusted EBITDA margin was 43.9% compared with 42.8% in the year-ago quarter. Wireless capital expenditures declined 8% year over year to C$218 million due to lower wireless infrastructure investments.

Wireline operating revenues increased 13.7% year over year to C$1,677 million. Data services revenues were C$1,168 million, up 14.6%. This was attributable to higher customer care and business services (CCBS) contracting revenues due to growth in business volumes from business acquisitions, increased Internet and enhanced data service revenues. Voice service (local and long distance) revenues were C$267 million, down 11.6%. Other service and equipment revenues were C$97 million, up 1%. Adjusted EBITDA of C$439 million increased 5.7% from the prior-year quarter figure. This was due to growth in data service margins including CCBS, Internet and TELUS Health services. Adjusted EBITDA margin was 27.6% compared with 28.2% in the year-ago quarter. Wireline capital expenditures declined 6.8% year over year to C$544 million due to lower expenditures related to customer premise equipment and reduction of broadband capital expenditures.

Cash Flow and Liquidity

For the third-quarter, free cash flow increased 40.9% year over year to C$303 million ($231.8 million). As of Sep 30, 2018, the company’s net debt was C$13,698 million ($10,611.2 million).

C$1 = $0.765035 (Period average from Jul 1, 2018 to Sep 30, 2018)

C$1 = $0.774655 (As on Sep 30, 2018)

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month.

VGM Scores

Currently, Telus has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Telus has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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