On Friday, Telus reported its second quarter, 2016 results. The company earned $415-million on revenue of $3.1-billion, a 1.5 per cent topline bump over the same period last year.
“Telus’s strong second quarter results and improved outlook reflect the effectiveness of our company’s industry-leading customer service and the robustness of our multitenet growth strategy,” said CEO Darren Entwistle. “Impressively, our team continues to deliver strong subscriber, revenue and EBITDA growth in both our wireless and wireline businesses despite the economic challenges in Alberta. Importantly, our strong financial performance further demonstrates Telus’s ability to fund simultaneously our strategic growth investments as well as the Toronto Stock Exchange and New York Stock Exchange’s only multiyear dividend growth and discretionary share purchase programs now running through 2019. Our consistent track record in this regard is unequivocal, as reflected by Telus having returned $13.3-billion to shareholders, including $8.2-billion in dividends and $5.2-billion in share purchases, representing over $22 per share between 2004 and July, 2016.”
Goff notes that Telus’s $0.70 in earnings was ahead of his estimate of $0.66, as was the company’s revenue number, which at $3.148-billion bested his estimate of $3.19-billion. The analyst says Telus remains his second favourite Canadian telco play.
“We rank TELUS ahead of BCE while modestly behind Rogers,” says the analyst. “Our view is tempered by the potential for heightened in-region competition from Shaw where it has recently introduced aggressive broadband promotions and we look to see how aggressively the company will push its X1 video platform and wireless post the LTE overlay. With ~$8/shr in EBITDA at TELUS, we could see significant moves about sentiment swings as investors focus on competitive optics. That said, we believe the potential for heightened competition is largely reflected in the Company’s valuation at 7.8x 2017 EV/EBITDA while BCE and Rogers are valued at 8.7x and 8.3x, respectively. Beyond the near-/mid-term competitive concerns, we continue to see TELUS shares as undervalued given the Company’s wireless driven growth profile, strong execution and shareholder commitment (7-10% annual dividend growth).”
In a research update to clients today, Goff maintained his “Buy” rating, but raised his one-year price target on the stock from $43.00 to $46.00, implying a return of 12.3 per cent at the time of publication.