Telus stock TSX: prediction from a fund manager

Canadian telecom name Telus (Telus Stock Quote, Charts, News, Analysts, Financials TSX:T) should be on investors’ minds these days, according to Scotia Wealth manager Greg Newman, who recently gave the nod to the stock as one of his Top Picks for the 12 months ahead.

Telus had a great run over the first two years of the pandemic, rising from about $25 at the start of 2020 to a high of $34 per share by last April. Since then, times have been less rosy, as the stock has dropped back to the $27-$28 range.

But Newman sees a lot of promise in Telus, not just for its core business in Internet and mobile but also for its still-emerging side projects in areas like health tech and IT.

“We always look at the negative and the positive, and what’s wrong with [Telus] is it’s not cheap and they do have their underlying businesses of aside from their main business. Health, technology and agriculture are all currently a headwind [but] those are all growth businesses that are all going to be a tailwind when they start growing more again,” said Newman, senior wealth advisor and portfolio manager at ScotiaMcLeod, who spoke on BNN Bloomberg on Friday.

“Meantime, even still in this environment, their Q4 revenues were up four per cent, their EBITDA was up 11 per cent and they’re showing the best-in-class growth of the Canadian telcos,” he said.

Telus reported its fourth quarter earnings last month, showing revenue up 3.8 per cent year-over-year to $5,058 million and adjusted EBITDA up 11.3 per cent to $1,689 million. 

Management guided for revenue to increase in 2023 by 11-14 per cent and EBITDA to climb by 9.5-11 per cent. Free cash flow is expected to hit $2 billion in 2023, which would represent a 60 per cent increase, as the company said its capital investments are expected to diminish on a relative basis. 

Newman said the bottom line improvement will look good on Telus.

BCE or Telus Stock?

“Like BCE, Telus is going to have lower capex into 2023, which helps them. All in, the Street is modelling 16 per cent earnings per share growth, and on 2024 [numbers] it trades at an undemanding multiple,” he said.

Telus Stock Dividend

“I love that dividend at five per cent,” he said. “I think if you buy this at the right time, you’re going to have some nice growth over the next year and over the next five years.”