Telstra share price: 4 things to look out for ahead of FY20 results
We examine when Telstra Corporation will report its FY20 results, the final dividend outlook, and the overall analyst view on the blue-chip telco.
When will the telco report its FY20 results?
Telstra Corporation (TLS) is set to report its full-year (FY20) results next Thursday, 13 August.
Telstra share price remains off 52-week highs
Though equity markets continue to trade well off their March-lows, volatility persists, with uncertainty around the depth and breadth of the coronavirus pandemic’s impact a key overhang for almost every asset class. Interestingly, while TLS – regarded as a defensive stock – has rallied around 20% from its March lows, it remains some ways off its 52-week high of $3.945 per share.
Analysts still see upside, Goldman eyes 8 cent final dividend
Despite recent share price weakness, sell-side analysts remain constructive on the stock, with TLS carrying an Overweight rating on average, according to the Wall Street Journal. From a price perspective, the blue-chip telco currently carries an average analyst price target of $3.85 per share – also according to the Wall Street Journal – suggesting modest upside potential from current price levels.
Not all analysts share such an optimistic view however, with Morgan Stanley (MS) recently saying: 'Fundamentally we think TLS shares are overvalued, inflated by falling bond yields.' Even so, MS thinks Telstra’s full-year dividend will remain stable at 16 cents per share.
Elsewhere, Goldman Sachs analysts argue that with Telstra having already reiterated its FY20 guidance in March – investors will likely be eager to see the company provide 2021 earnings, capital expenditure (CAPEX) and free cash flow guidance as part of its upcoming results release.
‘Given the resilient and relatively predictable nature of telco earnings, we do expect our coverage [including TLS] to all provide FY21 guidance, albeit with the potential for a wider range,’ the investment bank said.
Like Morgan Stanley, Goldman analysts believe Telstra can ‘comfortably’ support a 16 cents per share dividend at current earnings (EBITDA) levels, with the investment bank expecting TLS to report a final dividend of 8 cents per share.
Reiterated guidance in focus
Looking at Telstra’s reiterated guidance – provided in March – it was flagged that FY20 free cash flow (post operating lease payments) and underlying earnings (EBITDA) were expected to come in at the bottom end of the range, previously set at between $3.3-3.8 billion and $7.4-7.9 billion.
Full-year CAPEX is now expected to come in at the upper end of the $2.9-3.3 billion range.
At the time of the guidance restatement, Telstra’s Chief Executive Officer Andrew Penn, said:
'We know there will likely be more impacts for us from a financial perspective through this unprecedented period. It is a rapidly evolving situation, and therefore, notwithstanding our outlook update today, we will continue to monitor the effect of COVID-19 on our business and market further updates if necessary,’
From an earnings perspective, while Goldman is currently expecting Telstra to report total income of $26.7 billion – close to the upper end of the company’s own guidance – the investment bank expects the telco’s core earnings (EBITDA) to slump 9%, to $7.45 billion – a shade ahead of the bottom-end guidance.
Goldman has a Buy rating and a $4.10 price target on Telstra, suggesting moderate potential upside from current price levels.
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