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A month has gone by since the last earnings report for Telus (TU). Shares have added about 7% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Telus due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
TELUS’ Q2 Earnings Miss Estimates, Revenues Rise Y/Y
TELUS reported mixed second-quarter 2020 results, with the top line beating the Zacks Consensus Estimate and the bottom line missing the same.
Net Income
Net income in the June-end quarter fell 43.9% year over year to C$290 million or C$0.23 per share. This reflects impact from the COVID-19 pandemic, higher income tax, increased depreciation and amortization charges, and higher financing costs.
Adjusted net income was C$316 million or C$0.25 per share ($227.9 million or 18 cents per share) compared with C$416 million or C$0.35 per share in the prior-year quarter. The bottom line missed the Zacks Consensus Estimate by 3 cents.
Revenues
Quarterly total operating revenues increased 3.6% year over year to C$3,728 million ($2,689 million). This reflects the current economic environment wherein TELUS’ business customers are facing lower operations. The top line surpassed the consensus estimate of $2,646 million.
Segment Results
Revenues in TELUS Wireless declined 7.6% year over year to C$1,846 million due to lower network, and equipment and other service revenues. Network revenues fell 3.3% to C$1,472 million, reflecting a 5.8% decline in mobile phone ARPU. Equipment and other service revenues were C$360 million, down 20.9% year over year. This was caused by lower contracted volumes resulting from customers’ reduced shopping habits due to the COVID-19 pandemic.
The segment’s adjusted EBITDA of C$890 million decreased 3.7% over the same period a year ago, due to the impacts of the pandemic including lower roaming revenues resulting from restricted travel. Adjusted EBITDA margin was 48.2% compared with 46.3% in the year-ago quarter. Capital expenditures increased 4.9% year over year to C$234 million.
Revenues in TELUS Wireline increased 17.1% year over year to C$1,961 million, supported by data services revenue growth and other operating income growth of C$68 million. Data services revenues were C$1,493 million, up 18%. This was led by higher revenues from the company’s diverse portfolio of solutions including TELUS International customer care and business services. Voice service (local and long distance) revenues were C$236 million, down 5.2%. Other service and equipment revenues were C$95 million, remaining stable.
The segment’s adjusted EBITDA of C$471 million decreased 1.5% from the year-ago quarter figure. Adjusted EBITDA margin was 24.9% compared with 28.5% in the prior-year quarter, impacted by declines in legacy voice and data services, and higher employee benefit expenses mainly from business acquisitions. Capital expenditures were down 4.6% year over year to C$522 million.