TELUS (TU) Surpasses Earnings And Revenue Estimates In Q1

Leading Canadian telecom operator TELUS Corp. (NYSE:TU) reported impressive financial results in the first quarter of 2017, wherein both the top and bottom line outpaced the Zacks Consensus Estimate.

GAAP net income was approximately $327.1 million, up 14.6% year over year. GAAP earnings per share were 55 cents, up 14.1% year over year. First-quarter adjusted earnings per share were 56 cents, surpassing the Zacks Consensus Estimate of 52 cents.

Total revenue came in at approximately $2,416 million, up 2.9% year over year, and beat the Zacks Consensus Estimate of $2,331 million. Service revenues were $2,287 million, up 3.5% year over year. Equipment revenues totaled $119.4 million, down 8.1% year over year while other revenues were $9.8 million, up 8.3% year over year.

Quarterly operating income was $550.8 million, up 13.9% year over year. Adjusted EBITDA (earnings before interest, tax, depreciation and amortization) was $955.7 million, up 6.4% year over year. Quarterly adjusted EBITDA margin was 39.5% compared with 38.2% in the year-ago quarter.

In the first quarter of 2017, TELUS generated approximately $535.6 million of cash from operations, up 25.9% year over year. Free cash flow, in the reported quarter was $163.9 million, up a whopping 100.9% year over year.

Segmental Results

Wireless revenues increased 4.6% year over year to approximately $1,355.4 million in the reported quarter. Wireless network revenues rose 6.4% year over year to nearly $1,264 million. Equipment and Other revenues declined 12.9% to around $81.6 million. Other income decreased 60% to $1.5 million. Intersegment network revenues were $8.3 million, down 21.4% year over year.

Blended ARPU inched up 3.9% year over year to around $49.51. The monthly blended subscriber churn rate improved to 1.18% from 1.26% in the year-ago quarter. Postpaid customer churn rate was 0.93% compared with 0.97% in the year-ago quarter.

Net wireless subscriber loss in the reported quarter was 9,000. Postpaid customer net addition was 44,000. Prepaid customer net loss was 53,000. As of Mar 31, 2017, TELUS had 8.576 million wireless subscribers, up 2.3% year over year. Postpaid users were 7.594 million, up 3.8% while the prepaid user count was 0.982 million, down 8.4%.

Wireline revenues increased 1% year over year to approximately $1,108.3 million. Data service & equipment revenues came in at $781.9 million, up 4.2%. Voice revenues were $241.8 million, down 8%. Other services and equipment revenues were $37 million, down 15.5% and other operational revenues were nearly $8.3 million, up a considerable 57.1%. Intersegment revenues grossed around $39.3 million, up 10.6% year over year.

During the reported quarter, TELUS added 7,000 TV subscribers, reaching a total count of 1,070,000 customers (up 5.3% year over year). High-speed Internet subscriber addition was 24,000, reaching a total count of 1,686,000, up 5.4% year over year. Residential NALs were down 23,000, reaching 1.351 million (down 6.2% year over).

Dividend Hike

TELUS’ board of directors has declared a quarterly dividend of C$0.4925 per share payable on Jul 4, 2017 to holders of record at the close of business on Jun 9, 2017. This represents a 7.1% increase from the C$0.46 quarterly dividend paid on Jul 4, 2016.

Guidance

For 2017, TELUS expects revenues to fall within the range of C$13.18 – C$13.31 billion. EBITDA will be within the range of C$4.875 – C$5.04 billion. Basic EPS will be C$2.49 – C$2.66. Capital expenditures will be approximately C$3 billion.

Zacks Rank

TELUS currently carries a Zacks Rank #4 (Sell). The company competes with the likes of Rogers Communications Inc. (NYSE:RCI) , Shaw Communications Inc. (NYSE:SJR) and BCE Inc. (TO:BCE) in the Canadian telecom market. Rogers Communications and Shaw Communications currently carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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