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On Tuesday, BMO Capital Markets adjusted its price outlook on TELUS (NYSE:TU) Corporation (T:CN) (NYSE: TU), reducing the target to Cdn$23.00 from Cdn$24.00, while reaffirming an Outperform rating on the company’s shares. The adjustment reflects a moderated but still optimistic view of the telecommunications firm’s financial prospects. According to InvestingPro data, TELUS currently trades at a P/E ratio of 31.04 and offers a substantial 7.77% dividend yield, having maintained dividend payments for 27 consecutive years.
Tim Casey, an analyst at BMO Capital, highlighted TELUS’s potential for growth, citing several factors that contribute to the company’s positive outlook. These include a decrease in capital intensity, a diverse array of assets, the potential for reducing debt, strategic regional market exposure, and prospects for dividend growth. With a market capitalization of $21.73 billion and relatively low price volatility (beta of 0.7), TELUS has demonstrated stability while maintaining steady revenue growth.
TELUS has been pursuing strategies to lower its net debt to EBITDA ratio, aiming to reach approximately 3.0x by 2027, a reduction from the current level of around 3.9x. The management has outlined various avenues for deleveraging, including the potential sale of assets such as towers, which could bring in between Cdn$1.0 billion and Cdn$1.3 billion, and copper infrastructure, with an estimated net value of Cdn$0.5 billion. InvestingPro’s comprehensive analysis indicates a FAIR financial health score, with detailed metrics available in the Pro Research Report, which provides deep-dive analysis of TELUS among 1,400+ top stocks.
Further asset sales that TELUS is considering involve its real estate holdings, which could yield up to Cdn$3 billion, and TELUS Health, with a target value of over Cdn$1 billion. The company also mentioned that it may look into divesting other non-core assets as part of its deleveraging strategy.
During a recent conference, TELUS management noted their expectation that approximately Cdn$3 billion in asset sales would be sufficient to achieve the company’s leverage target. The planned divestitures are part of a broader effort to strengthen the company’s balance sheet and financial flexibility in the medium term.
In other recent news, TELUS Corporation reported its fourth-quarter 2024 earnings, surpassing analyst expectations with an earnings per share of $0.25, compared to the forecasted $0.23. The company’s revenue also exceeded estimates, reaching $5.38 billion against the expected $5.24 billion. This performance highlights TELUS’s robust operational execution despite challenging global economic conditions. Additionally, TELUS achieved a gross profit margin of 18.5%, marking a record high for the company.
In a separate development, BofA Securities downgraded TELUS’s stock rating from Buy to Neutral, citing concerns about the company’s leverage and dividend coverage. The firm also reduced TELUS’s price target from C$24.00 to C$22.00, reflecting elevated risks associated with its balance sheet. BofA Securities adjusted its EBITDA estimate for TELUS downward by 1.3% and revised its dividend growth forecast to 4% from the previous 7%. Despite these concerns, BofA acknowledged TELUS’s consistent operational performance and strategic initiatives aimed at achieving financial targets over the medium to long term.
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