Gabelli & Company Downgrades Telus (TU) to Hold, Price Target Only Calls for 15% Upside

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TU Hot Sheet

Rating Summary:
3 Buy, 3 Hold, 0 Sell

Rating Trend:

Up

Today's Overall Ratings:
Up: 16 | Down: 7 | New: 23

Gabelli & Company downgraded shares of Telus Corporation (NYSE: TU) today from its previous rating of Buy to a Hold rating. The firm also lowered its price target on the company from C$61 to C$59. Shares of TU are currently trading up slightly on the day.

Management at TU recently announced its financial targets for 2012 and reaffirmed its guidance for 2011. The highlights the company plans on increasing its wireless investments to help support growing wireless capacity demands and ongoing LTE deployment in urban markets.

The company's 2012 guidance calls for $10.7-$11 billion in sales, $3.8-$4 billion in EBITDA, earnings of $3.75-$4.14 per share, and CAPEX of $1.85 billion. Wireless revenues are forecasted to grow 5.5-8 percent while wireline revenues are expected to grow 1.5-5 percent.

An analyst at Gabelli & Company comments, "Significant exposure to wireless and solid demographic and GDP growth trends in Western Canada are meaningful positives. However, we believe that at current prices the stock is fairly valued at 6.4x 2012P EBITDA and does not offer a sufficient margin on safety based on our 2012 PMV estimate of C$59 per share."

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