Telus is a buy despite tough fourth quarter, says Euro Pacific Canada

A slide in Telus’s (Telus Stock Quote, Chart, News: TSX:T) share price that began last fall makes the company a compelling value despite the headwinds evidenced by it recent fourth quarter results, says Euro Pacific Canada analyst Rob Goff.

Yesterday, Telus reported its fourth quarter and fiscal 2015 results. In the fourth quarter, the company earned $261-million on revenue of $3.21-billion.

“Telus delivered solid fourth quarter revenue, EBITDA and subscriber growth in both its wireless and wireline businesses despite economic challenges impacting some of our customers in Alberta,” said CEO Darren Entwistle. “Our continued strong performance was the result of our unwavering focus on putting customers first, and the ongoing execution and success of a winning strategy that focuses on long-term capital investment to drive sustainable growth.”

On a conference call following the results, however, Entwistle admitted that 2015 was “a rather mediocre year” for the company.

Goff says the performance of Telus’s stocks makes it undervalued in absolute and relative terms, noting that it has taken a bigger hit than other telcos.

“The western economy and a tougher competitor in Shaw represent headwinds and sentiment ill-winds,” says Goff. “Those acknowledged, we consider TELUS’ rationalization efficiencies and wireless mix support continued financial growth ahead of its peers Rogers and BCE. We believe the shares represent attractive value for investors although we recognize that investor concerns towards Shaw and its wireless platform, WIND, will remain as an overhang.”

In a research update to clients today, Goff maintained his “Buy” rating on Telus, but lowered his one-year price target on the stock from $45.00 to $44.00, implying a return of 15.3 per cent at the time of publication.