On Thursday, RBC (TSX:RY) Capital adjusted its financial outlook for Telus (NYSE:TU) International (NYSE:TIXT), a global customer experience and digital solutions company. The firm reduced the stock price target to $10 from the previous $11 while keeping an Outperform rating on the shares.
Telus International reported its first-quarter 2024 earnings with revenues that fell short of both RBC Capital's and the consensus estimates from Wall Street. The company's management had previously indicated changes in how it would calculate adjusted EBITDA and adjusted EPS, aiming to align more closely with IFRS standards by no longer adding back stock-based compensation or changes in combination-related provisions.
The reported adjustments to EBITDA included a significant $29 million benefit due to business combination provisions. Without this benefit, the company's adjusted EBITDA would have also missed the estimates. This discrepancy has seemingly had a negative impact on Telus International's stock price, as it introduces a level of uncertainty to the company's financial reporting.
Despite the earnings miss and the reduction in the price target, RBC Capital maintains a positive outlook on Telus International, signified by the Outperform rating. This suggests that the firm believes the company's stock will perform better than the overall market in the future.
The adjustment to the stock price target and the earnings report are the latest financial developments for Telus International, which is navigating through the complexities of financial reporting and market expectations. The company has not provided any additional comments on the earnings miss or the impact of the accounting changes on its financial statements.
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