Is the Telstra (ASX:TLS) share price a buy today?

The Telstra Corporation Ltd (ASX: TLS) share price has gone up by 30% in the 2021 calendar year to date. Is it still an opportunity, or has the easy money been made?

Before we get to the opinion on Telstra shares, let’s look at the telco’s FY21 result which was filled with interesting information about the prior year.

Telstra’s FY21 result

When the telco announced its report it said that it had achieved a turning point in its financial performance and that it was building momentum towards growth.

On a reported basis, total income decreased by 11.6% to $23.1 billion. Net profit after tax (NPAT) rose by 3.4% to $1.9 billion.

Looking at underlying earnings before interest, tax, depreciation and amortisation (EBITDA) on a guidance basis, it decreased 9.7% to $6.7 billion. This included an in-year NBN headwind of around $650 million and an estimated $380 million financial impact from COVID. Excluding the in-year NBN headwind, underlying EBTIDA in the year declined by around $70 million.

Management have been focused on delivering T22 for a few years. Telstra has completed or is on track to achieve around 80% of its T22 scorecard metrics.

Costs and improving productivity is one area of focus. Total operating expenses declined by 10.2% for the year. Underlying fixed costs declined by $490 million, or 8.1%. Since FY16, the company has achieved around $2.3 billion of net productivity and remains on track to meet its target of $2.7 billion by the end of FY22. It has reduced net full-time roles by around 8,300 and removed on average more than four management layers.

Another area that may be impacting the Telstra share price is its monetisation strategy.

Sell-down of assets

The separation and sale of its 49% stake of InfraCo Towers is expected to be completed by the end of August. This transaction values Telstra’s InfraCo Towers at $5.9 billion. But the telco also gets to keep control of the business, whilst having partners like the Future Fund and Sunsuper as part of the InfraCo Towers.

The company had previously suggested that it would return about half of the net proceeds.

Telstra has announced an on-market share buy-back of up to $1.35 billion to return some of this capital to shareholders and maximise value.

Is the Telstra share price a buy today?

Plenty of brokers still think so.

For example, Morgans rates Telstra shares as a buy with a price target of $4.34. That implies a potential rise of around 10% over the next 12 months.

The broker noted that the mobile business is producing growth and this may continue for the next 12 months.

There could be more earnings growth to come and the telco industry environment appears to be improving for Telstra.

Telstra is expected by Morgans to pay a fully franked dividend yield of $0.16 per share in both FY22 and FY23. That translates to a grossed-up dividend yield of 5.8%.

The post Is the Telstra (ASX:TLS) share price a buy today? appeared first on The Motley Fool Australia.

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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 owns shares of 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 Bruce Jackson.

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