TELUS (TU) Q3 Earnings Beat, Revenues Lag Estimates
TELUS Corp.TU reported mixed third-quarter 2015 financial results wherein the bottom line surpassed the Zacks Consensus Estimate while the top line missed the same.
GAAP net income in the third quarter of 2015 was approximately $279.1 million, up 2.8% year over year. GAAP earnings per share were 47 cents, up 5.2% year over year. However, adjusted earnings per share in the reported quarter were 50 cents, above the Zacks Consensus Estimate of 48 cents.
Total revenue came in at approximately $2,413 million, up 4.2% year over year, but fell short of the Zacks Consensus Estimate of $2,423 million. Service revenues stood at $2,243.6 million, up 4.7% year over year. Equipment revenues totaled $158.3 million, up 4% year over year while Other revenues grossed $10.7 million, down a substantial 50% year over year.
Quarterly operating income was $456.5 million, down 1.5% year over year. Adjusted EBITDA (earnings before interest, tax, depreciation and amortization) was $855.7 million, up 2.2% year over year. Quarterly adjusted EBITDA margin stood at 35.5% versus 36.2% in the prior-year quarter.
Cash Flow & Liquidity
During the third quarter of 2015, TELUS generated approximately $778.5 million of cash from operations, down 1.8% year over year. Free cash flow, in the reported quarter, was around $237.1 million, up 41.6% year over year. TELUS exited the reported quarter with $107.8 million of cash & marketable securities and $8,956.2 million of outstanding debt compared with $49.7 million and $7,583.1 million, respectively, at the end of 2014. At the end of third-quarter 2015, the debt-to-capitalization ratio was 0.61 versus 0.55 at the end of 2014.
Wireless revenues increased 5.1% year over year to approximately $1,363.5 million in the reported quarter. Wireless network revenues climbed 4% year over year to $1,223.5 million. Equipment and Other revenues improved 14.4% to around $127.7 million. Intersegment network revenues rose 23.1% to $12.2 million. Within Network revenues, data revenues improved 12% while Voice revenues slid 4.5%.
Blended ARPU (average revenue per month) inched up 1.1% year over year to around $49.11. The monthly blended subscriber churn rate improved to 1.28% from 1.32% in the year-ago quarter. Postpaid customer churn rate was 0.97% compared with 0.90% in the year-ago quarter.
Net wireless subscriber addition in the reported quarter was 69,000, down 35.5% year over year. Postpaid customer net addition stood at 69,000, down 38.9% year over year. TELUS recorded no change in prepaid customers in the third quarter against a loss of 6,000 in the year-ago quarter. As of Sep 30, 2015, TELUS had 8.421 million wireless subscribers, up 2.8% year over year. Postpaid users were 7.290 million, up 4.3% and prepaid user count totaled 1.131 million, down 6.1%.
Wireline revenues increased 3% year over year to approximately $1,095.1 million. Data service & equipment revenues came in at $726.5 million, up 10.7%. Voice revenues stood at $285.2 million, down 6.5%. Other services and equipment revenues were $40.5 million, down 8.6% and Other operational revenues were $9.2 million, down 58.6%. Intersegment revenues grossed $33.6 million, down 4.3%.
During the reported quarter, TELUS added 26,000 TV subscribers, reaching the total count to 980,000 customers (up 10.4% year over year). High-speed Internet subscriber addition was 24,000, reaching the total tally at the end of the third quarter to 1.54 million (up 6.3% year over year). As of Sep 30, 2015, total wireline subscriber count was 5.606 million, up 1.3% year over year.
Zacks Rank & Stocks to Consider
TELUS currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the same sector are AT&T, Inc. T , Windstream Holdings, Inc. WIN and CenturyLink, Inc. CTL . All the three stocks hold a Zacks Rank #2 (Buy).