A Mix of Positives and Negatives Exists in Telus’ Q4 Earnings, but the Stock Looks Attractive

Telus' fourth-quarter earnings met our expectations on the top line, but margins came in weaker than we expected. The telecom business remains strong—with mobile again trailing Telus' competitors in a strong environment and fixed-line outperforming—but peripheral businesses remain a key component of the firm's performance. Those other businesses contribute to both higher growth but also weaker margins than Telus' peers. Still, we think Telus is very well positioned, as the fast-growing businesses should juice EBITDA growth, and the completion of the firm's network overhaul with fiber should lead to more cash available to return to shareholders. We are maintaining our CAD 32 fair value estimate and think the stock is undervalued.