TELUS Corporation TU reported fourth-quarter 2023 adjusted earnings per share (EPS) of C$0.24 (18 cents per share), which remained unchanged year over year. The bottom line surpassed the Zacks Consensus Estimate of 17 cents.
Quarterly total operating revenues increased 2.8% year over year to C$5,198 million ($3,818.4 million) owing to high service revenues in TELUS technology solutions and TELUS International. The top line missed the consensus estimate of $3,902.3 million.
The upside reflects higher demand for premium bundled offerings and strong customer retention efforts, resulting in total customer net additions of 404,000 in the reported quarter.
TELUS Corporation Price, Consensus and EPS Surprise
TELUS Corporation Price, Consensus and EPS Surprise
TELUS reports revenues in two segments — TELUS technology solutions (TTech) and Digitally-led customer experiences — TELUS International (DLCX).
In the fourth quarter, TTech revenues (arising from contracts with customers) rose 2.6% year over year to C$4,442 million, primarily driven by higher mobile network revenues, mobile equipment and solid performance across fixed data and health services. Mobile network revenues rose 3.8% year over year to C$1,759 million due to increasing mobile phone and connected device subscriber growth and moderating roaming revenue growth.
Fixed voice services revenues declined 3.1% year over year to C$188 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 5.1% year over year to C$432 million, driven by the solid demand for its integrated health, productivity, retirement and benefit solutions, higher uptake of virtual care solutions and growth in the pharmacy management software business.
The segment’s adjusted EBITDA of C$1,598 million increased 8% year over year, owing to broad-based cost-reduction efforts and organic health services growth. Adjusted EBITDA margin came in at 35.8% compared with 33.9% in the year-ago quarter.
Revenues from DLCX soared 13.3% year over year to C$969 million. Operating revenues (arising from contracts with customers) rose 2.9% to C$714 million, primarily driven by growth within the tech and games, eCommerce and fintech and other industry vertical clients.
The segment’s adjusted EBITDA of C$249 million increased 19.4% from the year-ago quarter’s figure. Adjusted EBITDA margin was 25.7% compared with 24.5% in the prior-year quarter.
Other Details
Adjusted EBITDA increased 9.4% year over year to C$1,847 million, driven by higher mobile network and health revenues and broad-based cost-reduction efforts across both the TTech and DLCX segments.
Cash Flow & Liquidity
In the fourth quarter, TELUS generated C$1,314 million of cash from operating activities compared with C$1,126 million in the year-ago quarter. The free cash flow for the same period increased 82.7% to C$590 million.
Capital expenditures (excluding spectrum licenses) declined 19.2% year over year to C$533 million due to a planned slowdown in fiber network investments.
As of Dec 30, 2023, the company had C$864 million of net cash and temporary investments with C$23,355 million in long-term debt compared with C$1,204 million and C$23,457 million, respectively, as of Sep 30, 2023.
2024 Outlook
TELUS TTech expects operating revenue growth of approximately 2-4%.
TELUS expects TTech adjusted EBITDA to grow in the range of 5.5-7.5%. The free cash flow is anticipated to be approximately $2.3 billion.
Capital expenditures are expected to be $2.6 billion.
Zacks Rank & Stocks to Consider
TELUS currently has a Zacks Rank #3 (Hold).
Some better-ranked stocks worth considering in the broader technology space are Itron ITRI, Woodward WWD and Watts Water Technologies WTS. Woodward and Itron sport a Zacks Rank #1 (Strong Buy), while Watts Water Technologies carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Itron’s 2023 EPS has remained unchanged in the past 60 days to $2.88. ITRI’s long-term earnings growth rate is 23%.
Itron’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 289.3%. Shares of ITRI have gained 32.5% in the past year.
The Zacks Consensus Estimate for Woodward’s 2024 EPS has inched up 5.7% in the past 60 days to $5.20. WWD’s long-term earnings growth rate is 15.5%.
Woodward’s earnings beat the Zacks Consensus in each of the last four quarters, the average surprise being 27.2%. Shares of WWD have gained 33.1% in the past year.
The Zacks Consensus Estimate for Watts Water Technologies 2023 EPS has improved 0.1% in the past 60 days to $8.09. WTS’s long-term earnings growth rate is 7.8%.
WTS’ earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 11.8%. Shares of WTS have soared 21.5% in the past year.
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