Telstra shares drop 2.15% as FY20 guidance is revised

Telstra provided the market with updated 2020 guidance figures today after the NBN Co released its Corporate Plan for 2020 to 2023, last week.

NBN Corporate Plan 2020 and beyond

Late last week the National Broadband Network (NBN Co) – the company tasked with building and operating Australia’s national broadband network, released its Corporate Plan for 2020 to 2023.

Here it was pointed out that the company was on track to connect 11.5 million homes and business by the end of FY20, with the NBN Co specifying that it ‘is planning to activate an additional 1.5 million premises in FY20’.

This morning Telstra Corp Ltd. (ASX: TSL) announced that it had revised its FY20 guidance around a number of key metrics in response to NBN Co’s latest Corporate Plan.

Telstra’s share price fell in response, dropping 1.6% in the morning session, and as much as 2.15% as of 14:55 AEST – to A$3.64 per share.

The broader market was down just 0.53% by comparison, and Telstra’s competitors: TPG and Vocus for example, were down 0.45% and 1.08%, respectively – as of 14:55 AEST.

Telstra updates its FY20 guidance

Telstra Corp Ltd. today guided for lower FY20 income and free cashflow from operating leases, while underlying earnings (EBITDA) was actually guided higher.

Capital expenditure and restructuring costs are expected to remain the same in FY20.

On the top-line, total income was previously expected to come in at between A$25.7 to A$27.7bn. It has now been guided to between A$25.3 to A$27.3bn, down approximately A$400m from previous estimates.

Free cashflow after operating lease payments is now also expected to come in some A$100m lower, with a revised guidance range of between A$3.3 to A$3.8bn. Previous guidance was between A$3.4 to A$3.9bn

In saying this, FY20 underlying earnings (EBITDA) guidance, which was previously expected to come in at A$7.3 to A$7.8bn, was revised upwards A$100m, to between A$7.4 to A$7.9bn.

Finally, today’s media release highlighted the fact that:

‘Telstra no longer anticipates FY20 being the year of peak nbn headwind and now estimates this will occur in FY21.’

Telstra was keen to point out that the NBN Co’s latest Corporate Plan does not impact the telco’s previous comments concerning earnings growth in FY20.

Here, the telco maintained that ‘underlying EBITDA excluding in-year nbn headwind is expected to grow by up to $500 million in FY20.’

Telstra share price: final thoughts

Ultimately, even though Telstra delivered solid FY19 results, its share price has fallen around 8% since its full-year results were released in mid-August.

Mind you, Telstra has still outperformed the broader market since January, rising 32% YTD.

Telstra is set to hold its Annual General Meeting on October 15.


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