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Is TELUS (TU) Poised to Beat Estimates in Q1 Earnings?

We expect Leading Canadian telecom service provider – TELUS Corporation TU – to beat expectations when it reports first-quarter 2016 numbers on May 5, before market opens.

Notably, the trailing four-quarter average earnings surprise for TELUS stands at 5.82%.

Let’s see how things are shaping up for this announcement.

Why a Likely Positive Surprise?

Our proven model shows that TELUS is likely to beat earnings because it has the perfect combination of two key ingredients.

Zacks ESP: Earnings ESP for TELUS stands at +3.85% because the Most Accurate estimate is 54 cents while the Zacks Consensus Estimate is pegged at 52 cents. A favorable Zacks ESP serves as a meaningful and leading indicator of a likely positive earnings surprise.  

Zacks Rank: TELUS currently has a Zacks Rank #2 (Buy). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 or 3 (Hold) have a significantly higher chance of beating earnings estimates. Conversely, Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.

The combination of TELUS’ Zacks Rank #2 and +3.85% ESP makes us reasonably confident of an earnings beat.

What's Driving the Better-than-Expected Earnings?

TELUS’ leading wireless subscriber base and increased penetration of smartphones are likely to boost the company’s bottom and top-line performance. Efforts to improve churn and attain higher average revenue per unit (ARPU) should also bolster results in the to-be-reported quarter.

Further, the company’s policy of cutting jobs in a bid to reduce costs is expected to result in significant savings. Meanwhile, the company’s increasing traction in the Internet of Things market and significant spectrum holdings are added positives.

Yet, intensifying competition and a highly leveraged balance sheet might hamper the quarter’s performance.

Other Stocks to Consider

TELUS is not the only company looking up this earnings season. Here are some other companies to consider as our model shows that they also have the right combination of elements to post an earnings beat this quarter:

Benefitfocus, Inc. BNFT has an earnings ESP of +4.00% and a Zacks Rank #2.

Cogent Communications Holdings, Inc. CCOI has an earnings ESP of +25.00% and a Zacks Rank #3.

Mattersight Corp. MATR has an earnings ESP of +6.67% and a Zacks Rank #3.

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
TELUS CORP (TU): Free Stock Analysis Report
 
COGENT COMM HLD (CCOI): Free Stock Analysis Report
 
BENEFITFOCUS (BNFT): Free Stock Analysis Report
 
MATTERSIGHT CP (MATR): Free Stock Analysis Report
 
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