Telus likely to top earnings

The communications company, based in Canada, is expected beat expectations when it reports its first-quarter 2013 results on Thursday.

By Zacks.com May 7, 2013 4:58PM

Arrow Up © Photodisc PhotolibraryBy Zacks Equity Research

 

We expect Canadian-based Telus Corporation (TU) to beat expectations when it reports its first-quarter 2013 results on Thursday.


Why the likely, positive surprise? Our proven model shows Telus is likely to beat earnings because it has the right combination of two key ingredients.


Positive Zacks ESP: Expected Surprise Prediction or ESP, (Read: Zacks Earnings ESP: A Better Method), which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +3.77%. This is a meaningful and leading indicator of a likely positive earnings surprise.


Zacks Rank #3 (Hold): Telus currently has a Zacks Rank #3. Note that the stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) and 3 (Hold) have a significantly higher chance of beating the earnings. 


The combination of Telus’s Zacks Rank #3 (Hold) and +3.77% ESP makes us confident of a positive earnings beat on Thursday.


What is driving the better-than-expected earnings?

Telus’ ongoing investment in the expansion of its fiber optic network provides compelling home entertainment services in the Western Canadian market. The company continues to add new features, as well as upgrading the existing features of its popular Optik TV and Optik High Speed Internet broadband services that are gaining strong traction across the Canadian region.


The company is providing 4G LTE networks with the popular smartphones, which resulted in solid growth in its post-paid divisions.


However, Telus remains challenged by the weak Canadian economy and domestic competition, which is expected to intensify with the entry of new wireless players. Moreover, the higher burden of subsidy cost, associated with smartphones coupled with lack of spectrum, will continue to impede the company’s growth opportunities.


Other stocks to consider

Other companies you may consider on the basis of our model, which have the right combination of elements to post an earnings beat this quarter, are as follows:


Research in Motion Limited (BBRY) currently has an Earnings ESP of +200.00% and holds a Zacks Rank #2 (Buy).


Sprint Nextel Corp. (S) has an Earnings ESP of +6.45% and holds a Zacks Rank #3 (Hold).


Dish Network Corporation (DISH) has an Earnings ESP of +1.89% and carries a Zacks Rank #3 (Hold).

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