TELUS (TU) Q3 Earnings Miss Estimates, Revenues Increase Y/Y
TELUS Corporation TU reported third-quarter 2023 adjusted earnings per share (EPS) of C$0.25 (19 cents per share) compared with C$0.34 in the prior-year quarter. The bottom line missed the Zacks Consensus Estimate of 20 cents.
Quarterly total operating revenues increased 7.2% year over year to C$5,008 million ($3,733.3 million) owing to high service revenues in TELUS technology solutions and TELUS International. The top line missed the consensus estimate of $3,763.3 million.
The upside reflects higher demand for premium bundled offerings and strong customer retention efforts, resulting in total customer net additions of 406,000 in the reported quarter.
TELUS Corporation Price, Consensus and EPS Surprise
TELUS Corporation price-consensus-eps-surprise-chart | TELUS Corporation Quote
Quarterly Segmental Results
TELUS reports revenues in two segments — TELUS technology solutions (TTech) and Digitally-led customer experiences — TELUS International (DLCX).
In the third quarter, TTech revenues (arising from contracts with customers) rose 7.8% year over year to C$4,284 million, primarily driven by higher mobile network revenues, mobile equipment and solid performance across fixed data and health services. Mobile network revenues rose 3.4% year over year to C$1,753 million due to increasing mobile phone and connected device subscriber growth and moderating roaming revenue growth.
Fixed voice services revenues declined 3.5% year over year to C$191 million. This reflects the ongoing decline in legacy voice revenues from technological substitution and price plan changes. This was partly offset by strong demand for bundled product offerings and migration from legacy to intellectual property service offerings.
Health services revenues increased C$197 million to C$422 million, driven by the positive impact of business acquisitions, higher uptake of virtual care solutions and growth in the pharmacy management software business.
The segment’s adjusted EBITDA of C$1,633 million increased 7% year over year, owing to an increase in direct contribution. Adjusted EBITDA margin came in at 37.9% compared with 38% in the year-ago quarter.
Revenues from DLCX soared 10.7% year over year to C$889 million. Operating revenues (arising from contracts with customers) rose 5.8% to C$706 million, primarily driven by growth within the communications and media, healthcare industry and tech and games sectors.
The segment’s adjusted EBITDA of C$187 million decreased 6.5% from the year-ago quarter’s figure. Adjusted EBITDA margin was 21% compared with 24.9% in the prior-year quarter.
Other Details
Adjusted EBITDA increased 5.5% year over year to C$1,820 million, driven by higher mobile network and health revenues, increased contributions from LifeWorks and increased margins for Internet and security.
Cash Flow & Liquidity
In the third quarter, TELUS generated C$1,307 million of cash from operating activities compared with C$1,300 million in the year-ago quarter. The free cash flow for the same period increased 7.3% to C$355 million.
Capital expenditures (excluding spectrum licenses) declined 16.9% year over year to C$769 million due to a planned slowdown in fiber network investments.
As of Sep 30, 2023, the company had C$1,204 million of net cash and temporary investments with C$23,457 million in long-term debt compared with C$649 million and C$22,872 million, respectively, as of Jun 30, 2023.
2023 Outlook
TELUS expects operating revenue growth of approximately 9.5-11.5%.
TELUS expects adjusted EBITDA to grow in the range of 7-8%. The free cash flow is anticipated to be approximately $1.5 billion.
Capital expenditures (excluding spectrum licenses) are expected to be $2.6 billion.
Zacks Rank & Stocks to Consider
TELUS currently has a Zacks Rank #4 (Sell).
Some better-ranked stocks in the broader technology space are Asure Software ASUR, Flex FLEX and Wix.com WIX. Each stock presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Asure Software’s 2023 EPS has increased 5.9% in the past 60 days to 54 cents.
Asure Software’s earnings beat the Zacks Consensus Estimate in all the last four quarters, the average being 676.4%. Shares of ASUR have surged 27.5% in the past year.
The Zacks Consensus Estimate for Flex’s 2024 EPS has gained 3.6% in the past 60 days to $2.56. Flex’s long-term earnings growth rate is 12.4%. Shares of FLEX have gained 35.4% in the past year.
The Zacks Consensus Estimate for Wix’s 2023 EPS has increased 7.5% in the past 60 days to $3.60.
Wix’s earnings beat estimates in all the trailing four quarters, delivering an average surprise of 319.3%. Shares of WIX have rallied 24.1% in the past year.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
TELUS Corporation (TU) : Free Stock Analysis Report
Flex Ltd. (FLEX) : Free Stock Analysis Report
Asure Software Inc (ASUR) : Free Stock Analysis Report
Wix.com Ltd. (WIX) : Free Stock Analysis Report
