Telus Corporation (TSX:T)(NYSE:TU), one of the largest telecommunication companies in Canada, announced second-quarter earnings results on the morning of August 7, and its stock has responded by falling about 2% in the trading sessions since. Let’s take a closer look at the results to determine if we should consider using this weakness as a long-term buying opportunity, or if there is an underlying factor that could hold the stock back going forward.
Subscriber growth leads to a very strong Q2 performance
Here’s a summary of Telus’s second-quarter results compared with what analysts had anticipated and its results in the same period a year ago.
|Adjusted Earnings Per Share||$0.66||$0.66||$0.63|
|Operating Revenues||$3.10 billion||$3.09 billion||$2.95 billion|
Source: Financial Times
Telus’s adjusted earnings per share increased 4.8% and its operating revenues increased 5.1% compared with the second quarter of fiscal 2014. These very strong results can be attributed to the company’s total customer connections increasing 2.5% to 13.94 million, including a 3.3% increase in the number of wireless subscribers to 8.35 million, a 6.2% increase in the number of high-speed Internet subscribers to 1.5 million, and a 10% increase in the number of TV subscribers to 954,000.
Here’s a quick breakdown of eight other notable statistics from the report compared with the year-ago period:
- Revenue increased 7.4% to $1.74 billion in its Telus Wireless segment
- Revenue increased 2.3% to $1.42 billion in its Telus Wireline segment
- Adjusted earnings before interest, taxes, depreciation, and amortization increased 5.1% to $1.14 billion
- Average revenue per user increased 2.9% to $63.48 in its Telus Wireless segment
- Cash provided by operating activities increased 10.3% to $943 million
- Free cash flow increased 42.9% to $300 million
- Return on common equity improved 30 basis points to 18.3%
- Outstanding shares at the end of the period decreased 2.1% to 602 million
Telus also announced that it will be maintaining its quarterly dividend of $0.42 per share, and the next payment will come on October 1 to shareholders of record at the close of business on September 10.
Should you buy shares of Telus today?
It was a fantastic quarter overall for Telus, so I do not think the post-earnings drop in its stock was warranted. With this being said, I think Foolish investors should consider using it as a buying opportunity for two primary reasons.
First, Telus’s stock now trades at just 17.2 times fiscal 2015’s estimated earnings per share of $2.56 and only 15.7 times fiscal 2016’s estimated earnings per share of $2.80, both of which are very inexpensive compared with the industry average price-to-earnings multiple of 20.7.
Second, Telus pays an annual dividend of $1.68 per share, which gives its stock a 3.8% yield at today’s levels. It is also very important to note that the company has increased its dividend nine times since announcing its multi-year dividend-growth program in May 2011, and it expects to increase it by another 10% annually through 2016, making it one of the top dividend-growth plays in the market.
With all of the information above in mind, I think Telus Corporation represents the best long-term investment opportunity in the telecommunications industry today. All Foolish investors should strongly consider making it a core holding.
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Fool contributor Joseph Solitro has no position in any stocks mentioned.