Looking to buy Telstra shares? Here’s what to watch when the telco giant reports this week

Investors looking at the Telstra Corporation Ltd (ASX: TLS) share price may be wondering if it’s an opportunity and will want to have a close look at the company’s upcoming FY22 result.

Telstra is scheduled to release its FY22 report on 11 August 2022.

It’s a significant result for the company. Not only does it come at a time when the ASX share market is experiencing much volatility, but it’s also the last result that outgoing CEO Andy Penn will deliver. The incoming CEO is Telstra’s current chief financial officer Vicki Brady.

Profit expectations

One of the main ways that investors like to judge a business is how much net profit after tax (NPAT) or cash flow it generates.

For Telstra, its profit has been under pressure for a number of years because of the shift to the NBN.

But, the company is now expecting to grow profit in the next few years.

The estimate on CMC Markets suggests Telstra could generate earnings per share (EPS) of 14.3 cents in FY22. Brokers like Credit Suisse, Morgan Stanley, and Ord Minnett all think that Telstra will generate approximately 14 cents of EPS.

If Telstra were to make 14 cents of EPS in FY22, that would put the current Telstra share price at 29 times FY22’s estimated earnings. But remember, profit is expected to rise from there as a result of the company’s T25 strategy.

Average revenue per user (ARPU)

One of the key statistics for Telstra is its ARPU, which is essentially how much money it brings in from each customer.

In the FY22 half-year result, Telstra said that it experienced strong mobile growth with earnings before interest, tax, depreciation and amortisation (EBITDA) growing by 25% for that segment. Post-paid ARPU went up by 5% and the number of post-paid services increased by 84,000.

Telstra said with its HY22 report that its continued focus on mobile network leadership and building value resulted in that ARPU growth. The telco recently announced it was increasing its post-paid mobile prices by the rate of CPI inflation. This could happen each year.

Wireless broadband

I’ll be keeping a close watch on what Telstra says about its wireless broadband service, powered by 5G.

A key reason for the profit decline in the last few years has been the loss of earnings due to the shift to the NBN. Now Telstra is handing a large amount of margin over to NBN Co.

But, if it can encourage households to switch to using a wireless 5G connection for their home internet, it could lead to more revenue and higher profit margins for the telco.

Telstra dividend

Of course, many investors will want to know about the Telstra dividend.

Telstra is aiming to keep paying an annual dividend of 16 cents per share until it’s able to grow the dividend and profit over time.

Therefore, the expectation is that Telstra will pay a FY22 final dividend of 8 cents per share, bringing the full-year dividend to 16 cents per share.

At the current Telstra share price, that translates into an expected grossed-up dividend yield of 5.7%.

The post Looking to buy Telstra shares? Here’s what to watch when the telco giant reports this week appeared first on The Motley Fool Australia.

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More reading

• Own Telstra shares? Here’s what to expect from its FY22 results
• Road to retribution: Can the Telstra share price continue its upwards trajectory under a new CEO?
• Expert says Telstra is a blue chip ASX 200 share to buy
• ‘Competition is key’: Why Telstra shares are in the ACCC naughty corner today
• Is the Telstra share price on the way back up?

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Telstra Corporation Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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