UpdatedBA-Merrill Lynch rates TLS as Neutral, Medium Risk (3) - The broker has reduced its forecast earnings for Telstra by 6% and 5% in FY10-11 following the disappointing result and further reduction in profit guidance. The result shows Telstra is rapidly losing landline customers to other forms of telephony and struggling on fixed broadband and mobile as well as customers switching providers. Yellow Pages print revenues also fell dramatically.
The broker notes Telstra's share price should be underpinned by the potential for a positive outcome on the NBN deal, and that the stock still offers a handsome yield. But with market share sliding, there is little in the way of upside at present. Neutral retained.
Target falls from $3.35 to $3.20.
Target price is $3.20 Current Price is $3.22 Difference:($0.02) - (brackets indicate current price is over target). If TLS meets the BA-Merrill Lynch target it will return approximately - 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).
The company's fiscal year ends in June. BA-Merrill Lynch forecasts a full year FY10 dividend of 28.00 cents and EPS of 32.00 cents. At the last closing share price the estimated dividend yield is 8.70%. At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 10.06.
Citi rates TLS as Buy, High Risk (1) - With 1H net profit missing consensus by 2%, the broker calls it a disappointing result, with deteriorating revenue trends across fixed line, mobile and broadband. However, the broker still sees Telstra as an "event stock" and the event is the NBN. And with Citi confident of a positive NBN deal pre Election, the Buy call is maintained.
Target price is $3.80 Current Price is $3.22 Difference:$0.58 - (brackets indicate current price is over target). If TLS meets the Citi target it will return approximately 18% (excluding dividends, fees and charges - negative figures indicate an expected loss).
The company's fiscal year ends in June. Citi forecasts a full year FY10 dividend of 285.00 cents and EPS of 31.30 cents. At the last closing share price the estimated dividend yield is 88.51%. At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 10.29.
Credit Suisse rates TLS as Outperform (1) - Interim earnings were weaker than the broker had forecast and dividend came in below its expectation and to reflect this the broker has lowered its forecasts for coming years.
While it retains its price target and Outperform rating the broker notes the investment case for the company is tied to NBN negotiations, as in its view the Government has compelling reasons to work with the company and complete a deal.
Target price is $3.80 Current Price is $3.22 Difference:$0.58 - (brackets indicate current price is over target). If TLS meets the Credit Suisse target it will return approximately 18% (excluding dividends, fees and charges - negative figures indicate an expected loss).
The company's fiscal year ends in June. Credit Suisse forecasts a full year FY10 dividend of 28.00 cents and EPS of 31.20 cents. At the last closing share price the estimated dividend yield is 8.70%. At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 10.32.
Deutsche Bank rates TLS as Buy (1) - The 2.5% drop in 1H sales revenue was worse than the broker expected due to weak operating conditions. However, the broker thinks that improvements in the economic environment should feed through in FY11, which will see the company return to 1% top-line growth.
Yet while the broker thinks Telstra's PER is unlikely to ever recover to pre- 2009 levels, it has retained its Buy call due to a yield of 9% and the potential for an eventual re-rating if the top-line recovery thesis plays out in FY11.
Target price is $3.50 Current Price is $3.22 Difference:$0.28 - (brackets indicate current price is over target). If TLS meets the Deutsche Bank target it will return approximately 9% (excluding dividends, fees and charges - negative figures indicate an expected loss).
The company's fiscal year ends in June. Deutsche Bank forecasts a full year FY10 dividend of 28.00 cents and EPS of 32.00 cents. At the last closing share price the estimated dividend yield is 8.70%. At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 10.06.
UpdatedMacquarie rates TLS as Neutral (3) - Target $3.50 (was $3.60). Interim earnings were lower than expected, with the broker noting the result showed a rapid deterioration in revenue trends and lower sales revenue guidance than had previously been expected.
While lower than expected interest charges and a tax refund see the broker lift its earnings forecasts in FY10, it has lowered its numbers in subsequent years to reflect its view arresting current trends is not going to be a cheap exercise.
The changes mean a reduction in price target and with its outlook still cautious the broker retains its Neutral rating.
Target price is $3.50 Current Price is $3.22 Difference:$0.28 - (brackets indicate current price is over target). If TLS meets the Macquarie target it will return approximately 9% (excluding dividends, fees and charges - negative figures indicate an expected loss).
The company's fiscal year ends in June. Macquarie forecasts a full year FY10 dividend of 28.00 cents and EPS of 31.50 cents. At the last closing share price the estimated dividend yield is 8.70%. At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 10.22.
RBS Australia rates TLS as Buy (1) - Target $4.25 (was $4.30). Revenues declines for 1H10 were larger than the broker had expected thanks to falling fixed broadband subscriber numbers, a speeding up of PSTN revenues falls and slower mobile growth, while positives in the result included mobile data growth and strong cost control.
While its EBITDA numbers are largely unchanged the broker has trimmed its earnings per share forecast for FY10 and as a result lowered its price target for the stock.
An agreement on the NBN is likely to see the stock re-rated and given this the broker retains its Buy rating.
Target price is $4.25 Current Price is $3.22 Difference:$1.03 - (brackets indicate current price is over target). If TLS meets the RBS Australia target it will return approximately 32% (excluding dividends, fees and charges - negative figures indicate an expected loss).
The company's fiscal year ends in June. RBS Australia forecasts a full year FY10 dividend of 30.00 cents and EPS of 32.50 cents. At the last closing share price the estimated dividend yield is 9.32%. At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 9.91.
UBS rates TLS as Buy (1) - While the result was in line with expectations, UBS points out that it hid poor revenue performance and that the company appears to be loosing momentum.
As a result, UBS has lowered its FY10 earnings forecasts by 5% and FY11 by 3%.
Despite these downgrades, UBS remains a Buy on the stock as the national broadband network is seen as key.
Target price is $4.00 Current Price is $3.22 Difference:$0.78 - (brackets indicate current price is over target). If TLS meets the UBS target it will return approximately 24% (excluding dividends, fees and charges - negative figures indicate an expected loss).
The company's fiscal year ends in June. UBS forecasts a full year FY10 dividend of 28.00 cents and EPS of 31.00 cents. At the last closing share price the estimated dividend yield is 8.70%. At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 10.39.
Market Sentiment: 0.7
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TLS Price at posting:
$3.12 Sentiment: None Disclosure: Not Held
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