What's in Store for TELUS Corp. (TU) This Earnings Season?

TELUS Corp. TU is scheduled to release fourth-quarter 2017 results, before the opening bell on Feb 8.

The company’s bottom line met the Zacks Consensus Estimate in only one of the previous four quarters, the average miss being 4.04%.

Let’s see how things are shaping up prior to this announcement.

Factors at Play

TELUS faces fierce wireless competition in Canada from large incumbents like Rogers Communications Inc. RCI, BCE Inc. BCE and other small regional carriers. Moreover, Shaw Communications Inc.’s SJR decision to venture into the Canadian wireless market with the WIND Mobile acquisition raises competition for Rogers Communications.

Meanwhile, on the wireline side of the business, competition has increased, with cable TV operators moving from offering phone service based on ‘circuit-switched’ technology to the less-costly Voice-over-Internet Protocol (VoIP). Capital expenditure in the wireline segment includes investments in broadband infrastructure, to bring in more business and residential customers directly under fiber optic cable.

Intensifying competitive threat, arising from small regional carriers like MTS in Manitoba and SaskTel in Saskatchewan, has raised concern for TELUS. Such intense competitive pressure has resulted in reduced subscriber addition for the company. Notably, for full-year 2018, TELUS projected its consolidated capital expenditures (excluding the purchase of spectrum licences) of approximately C$2.85 billion compared with C$2.9 billion in 2017. Continuous network investments can adversely affect TELUS’s cash flows, especially in a space where TELUS is facing pressure.

Buoyed by such headwinds, TELUS’ shares have lost 0.85%, same as the industry’s decline over the past three months.

On the other hand, TELUS continues to benefit from increased penetration of smartphones, higher average revenue per unit, accelerating wireless data services and growing wireline fiber optic networks. The company expects balanced growth for its wireless and wireline businesses, owing to its investments in high-speed broadband technology and services and its Customer First strategy.

The company has also teamed up with Mojio to deliver connected car services in Canada. Mojio devices will allow drivers to connect their vehicles to the Internet through the TELUS network, thus allowing easy tracing, monitoring and identification of cars using smartphones.

With the Internet of Things (IoT) marketplace having made its way into Canada, TELUS is aiming to consolidate its foothold in the IoT market. It has also introduced the TELUS Global IoT Connectivity platform to deliver seamless connectivity and simplified billing across 200 networks globally, to support the expansion of Canadian business enterprises.

Earnings Whispers

Our proven model does not conclusively show that TELUS is likely to beat estimates this time around. This is because, a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to beat estimates. Unfortunately, that is not the case here as elaborated below.

Zacks ESP: TELUS has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 44 cents. You can uncover the best stocks to buy or sell before they’re reported with the Earnings ESP Filter.

Zacks Rank: TELUS has a Zacks Rank #4 (Sell).

Notably, we caution against stocks with a Zacks Rank #4 or #5 (Strong Sell) going into the earnings announcement, especially when the company has not witnessed any estimate revisions.

TELUS Corporation Price and EPS Surprise

 

TELUS Corporation Price and EPS Surprise | TELUS Corporation Quote

Key Pick

Windstream Holdings Inc. WIN has the right combination of elements to post an earnings beat when it reports fourth-quarter 2017 results on Feb 22. Windstream has an Earnings ESP of +16.79% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

For Windstream, the Zacks Consensus Estimate for fourth-quarter 2017 is pegged at a loss 39 cents per share, indicating a year-over-year improvement of 23.53%. Similarly, the Zacks Consensus Estimate for fourth-quarter 2017 revenues stands at $1.49 billion, reflecting a year-over-year increase of 13.70%.

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TELUS Corporation (TU) : Free Stock Analysis Report
 
BCE, Inc. (BCE) : Free Stock Analysis Report
 
Shaw Communications Inc. (SJR) : Free Stock Analysis Report
 
Rogers Communication, Inc. (RCI) : Free Stock Analysis Report
 
Windstream Holdings, Inc. (WIN) : Free Stock Analysis Report
 
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