Telus facing big challenge from Rogers for wireless business, says Echelon

Echelon Wealth Partners analyst Rob Goff says he is cautious heading into Telus’s (Telus Stock Quote, Chart, News: TSX:T) second quarter results.

On Friday, August 5, Telus will report its Q2, 2016 results. The company is following on a first quarter in which it earned $378-million on revenue of $3.1-billion, a bottom line that was down 9.1 per cent from the same period a year prior, while the company’s topline was up 2.6 per cent.

Management said its earnings were affected by a restructuring.

Goff says the story of Telus recently is of one door opening while another closes.

“We are somewhat cautious heading into TELUS’s Q216 results on August 5th,” says the analyst. We look for revenue/EBITDA/EPS of $3,199M/$1,130M/$0.66, which after adding back ~$45M for restructuring charges are generally in line with the consensus at $3,195M/$1,185M/$0.69. While financials are likely to be in line with expectations, the strength of Rogers’ Q216 wireless subscribers suggests potential challenges on wireless. These challenges will likely be somewhat offset by the window potentially opened by the disappointing wireline subscriber results from Shaw. Net-net, the subscriber tone may represent a headwind as any outperformance on wired gets discounted looking at the more aggressive posture taken by Shaw on its new internet pricing and given its strong product roadmap. It remains to be seen whether Rogers’ strong gross postpaid activations (+11.5% y/y) reflected a stronger market tone or whether the company took share.”

In a research update to clients today, Goff maintained his “Buy” rating and one-year price target of $43.00 on Telus, implying a return of 2.2 per cent at the time of publication.