TELUS (TU) Q2 earnings and revenue best estimates, year-over-year increase

TELUS Company TU reported adjusted earnings per share of CA$0.32 per share (25 cents per share) in the second quarter of 2022, compared to CA$0.26 per share in the year-ago quarter. The net result beat Zacks’ consensus estimate by 22 cents.

Total quarterly operating revenue increased 7.1% year-over-year to C$4,401 million ($3,449 million) due to strong service revenue from TELUS technology solutions and TELUS International. The top line exceeded the consensus estimate of $3,439 million.

The increase reflects increased demand for premium bundles and strong customer retention efforts which resulted in a total net addition of 247,000 customers in the current quarter.

TELUS Corporation price, consensus and BPA surprise

price-consensus-eps-surprise-graph of TELUS Corporation | TELUS Corporation Submission

Quarterly segment results

TELUS reports revenue in two segments — TELUS Technology Solutions (TTech) and Digitally-Centric Customer Experiences — TELUS International (DLCX).

In the second quarter, TTech’s revenue (arising from customer contracts) increased 4% year-over-year to C$3,701 million, primarily due to higher mobile network revenue and the strong performance of Fixed Data Services, Agriculture, Customers and Healthcare. Mobile network revenue increased 6.4% year-over-year to C$1,623 million due to higher mobile phone ARPU and subscriber growth .

Fixed voice revenue decreased 6.1% year-over-year to C$201 million. This reflects the continued decline in legacy voice revenue due to technology substitution and changes in rate plans. This was partially offset by strong demand for bundled product offerings and the migration of legacy service offerings to IP services.

Healthcare services revenue increased 7.9% to C$137 million, driven by the positive impact of business acquisitions, increased adoption of virtual care solutions, growth in Health Benefits Management and TELUS Health Centers.

Segment adjusted EBITDA of C$1,436 million increased 6.1% year-on-year, driven by an increase in the direct contribution from mobile and fixed products and services, partially offset by an increase in personnel costs and bad debts. Adjusted EBITDA margin was 38.4% compared to 37.9% in the prior year quarter.

TELUS International (DLCX) revenue climbed 21.1% year-over-year to C$797 million. Operating revenue (from customer contracts) increased 22.2% to C$672 million, driven primarily by growth in technology and gaming, banking and financial services, and e-commerce and fintech.

Segment adjusted EBITDA of C$186 million increased 35.6% from the prior year quarter. Adjusted EBITDA margin was 23.4% compared to 20.9% in the prior year quarter.

TELUS’ PureFibre network covered more than 2.8 million premises at the end of the second quarter of 2022, compared to nearly 2.6 million premises in the prior year quarter.

Other details

Adjusted EBITDA increased 8.9% year-over-year to CA$1,622 million, driven by higher internet and data service revenues, higher mobile revenues from a accretive subscriber base and the increased contribution from the acquisition of DLCX.

Cash flow and liquidity

In the second quarter, TELUS generated C$1,250 million of cash provided by operating activities, compared to C$1,244 million in the corresponding quarter last year. Free cash flow for the same period decreased by 2.4% to C$205 million.

Capital expenditures (excluding spectrum licenses) climbed 15.4% year-on-year to C$1,054 million on increased investment in 5G, improved development products and digitization to increase system capacity and reliability.

As of June 30, 2022, the company had C$382 million of net cash and short-term investments with C$21,628 million of long-term debt, compared to C$774 million and C$21,319 million, respectively. , as of March 31, 2022.

Outlook 2022

TELUS expects adjusted EBITDA growth in the range of 8 to 10%. Free cash flow is expected to be between $1 billion and $1.2 billion. The company is confident in its ability to strengthen its operating momentum through an accelerated broadband expansion program and synergies from the recent acquisition of Lifeworks.

Zacks Ranking and Stocks to Consider

TELUS currently has a Zacks rank #3 (Hold).

Some top-ranked stocks in the broader tech space are Cadence Design Systems CDNS, badger meter BMI and Arista Networks A NET. Cadence Design Systems, Badger Meter, and Arista Networks (ANET) each sport a Zacks #1 ranking (Strong Buy). You can see the full list of today’s Zacks #1 Rank stocks here.

The Zacks consensus estimate for CDNS 2022 earnings is pegged at $4.11 per share, up 5.7% over the past 60 days. The long-term earnings growth rate is expected to be 17.7%.

Cadence’s earnings have exceeded the Zacks consensus estimate for the past four quarters, averaging 9.8%. Shares of CDNS have jumped 24.1% over the past year.

The Zacks consensus estimate for BMI’s earnings in 2022 is pegged at $2.30 per share, up 7% over the past 60 days.

Earnings at Badger Meter have exceeded the Zacks consensus estimate in three of the previous four quarters, averaging 12.6%. BMI shares have lost 5.5% of their value over the past year.

Zacks’ consensus estimate for Arista Network’s 2022 earnings is pegged at $3.99 per share, up 8.4% over the past 60 days. The long-term earnings growth rate is expected to be 18.6%.

Arista Network’s earnings have exceeded Zacks’ consensus estimate for the past four quarters, averaging 10.1%. ANET shares have risen 34.9% over the past year.

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