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TELUS (TU) Q2 Earnings Miss Estimates, Revenues Rise Y/Y

TELUS Corporation TU reported second-quarter 2023 adjusted earnings per share (EPS) of C$0.19 (14 cents per share) compared with C$0.32 in the prior-year quarter. The bottom line missed the Zacks Consensus Estimate of 18 cents.

Quarterly total operating revenues increased 12.4% year over year to C$4,946 million ($3,682.4 million) owing to high service revenues in TELUS technology solutions and TELUS International. The top line missed the consensus estimate of $3,715.3 million.

The upside reflects higher demand for premium bundled offerings and strong customer retention efforts, resulting in total customer net additions of 293,000 in the reported quarter.

TELUS Corporation Price, Consensus and EPS Surprise

TELUS Corporation Price, Consensus and EPS Surprise
TELUS Corporation Price, Consensus and EPS Surprise

TELUS Corporation price-consensus-eps-surprise-chart | TELUS Corporation Quote

Quarterly Segmental Results

TELUS reports revenues in two segments — TELUS technology solutions (TTech) and Digitally-led customer experiences — TELUS International (DLCX).

In the second quarter, TTech revenues (arising from contracts with customers) rose 13.8% year over year to C$4,211 million, primarily driven by higher mobile network revenues, mobile equipment and solid performance across fixed data and health services. Mobile network revenues rose 5.9% year over year to C$1,718 million due to increasing mobile phone and connected device subscriber growth and higher base rate plans.

Fixed voice services revenues declined 5.5% year over year to C$190 million. This reflects the ongoing decline in legacy voice revenues from technological substitution and price plan changes. This was partly offset by strong demand for bundled product offerings and migration from legacy to intellectual property service offerings.

Health services revenues increased C$291 million to C$428 million, driven by the positive impact of business acquisitions, higher uptake of virtual care solutions and growth in traditional pharmacy solutions.

The segment’s adjusted EBITDA of C$1,551 million increased 8.1% year over year, owing to an increase in direct contribution. Adjusted EBITDA margin came in at 36.7% compared with 38.4% in the year-ago quarter.

Revenues from DLCX soared 12.4% year over year to C$896 million. Operating revenues (arising from contracts with customers) rose 7.6% to C$723 million, primarily driven by growth within the communications and media, healthcare industry and tech and games sectors.

The segment’s adjusted EBITDA of C$152 million decreased 18.6% from the year-ago quarter’s figure. Adjusted EBITDA margin was 16.9% compared with 23.4% in the prior-year quarter.

Other Details

Adjusted EBITDA increased 5% year over year to C$1,703 million, driven by higher mobile network and health revenues, increased contributions from LifeWorks and increased margins for Internet and security.

Cash Flow & Liquidity

In the second quarter, TELUS generated C$1,117 million of cash from operating activities compared with C$1,250 million in the year-ago quarter. The free cash flow for the same period increased 36% to C$279 million.

Capital expenditures (excluding spectrum licenses) declined 23.4% year over year to C$807 million due to a planned slowdown in fiber network investments.

As of Jun 30, 2023, the company had C$649 million of net cash and temporary investments with C$22,872 million in long-term debt compared with C$877 million and C$24,055 million, respectively, as of Mar 31, 2023.

2023 Outlook

TELUS expects operating revenue growth of approximately 9.5-11.5% compared with the previous guidance of 11-14%.

TELUS expects adjusted EBITDA to grow in the range of 7-8% compared with the previous guidance of 9.5-11%. The free cash flow is anticipated to be approximately $1.5 billion.

Capital expenditures (excluding spectrum licenses) are expected to be $2.6 billion.

Zacks Rank & Stocks to Consider

TELUS currently has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology space are InterDigital IDCC, Badger Meter BMI and Woodward WWD. Badger Meter and Woodward sport a Zacks Rank #1 (Strong Buy), whereas InterDigital carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for InterDigital’s 2023 EPS has increased 0.1% in the past 60 days to $8.08. The company’s long-term earnings growth rate is 13.9%.

InterDigital’s earnings beat estimates in all the trailing four quarters, delivering an average surprise of 168%. Shares of IDCC have rallied 54% in the past year.

The Zacks Consensus Estimate for Badger Meter’s 2023 EPS has increased 6.3% in the past 60 days to $2.86.

Badger Meter’s earnings beat the Zacks Consensus Estimate in all the last four quarters, the average being 6.7%. Shares of BMI have surged 80.5% in the past year.

The Zacks Consensus Estimate for Woodward’s fiscal 2023 EPS has increased 9.7% in the past 60 days to $3.93.

WWD’s long-term earnings growth rate is 13.5%. Shares of WWD have gained 20.2% in the past year.

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TELUS Corporation (TU) : Free Stock Analysis Report

Badger Meter, Inc. (BMI) : Free Stock Analysis Report

InterDigital, Inc. (IDCC) : Free Stock Analysis Report

Woodward, Inc. (WWD) : Free Stock Analysis Report

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