Later this week Telstra Corporation Ltd (ASX: TLS) will release one of the most highly anticipated results during earnings season.
And with its shares up significantly since the start of the year, expectations appear to be high for the telco giant.
In order to prepare readers for the result, I thought I would take a look at what one leading broker is expecting from Telstra in FY 2019.
What to expect.
According to a note out of Goldman Sachs, it has forecast strong underlying earnings this year and guidance "to reflect the significantly improved mobile outlook."
It has also suggested that the telco company may provide an update on potential asset sales, which its estimates "could crystallize an additional 9-12cps of value."
Financial performance and dividend.
Goldman has forecast a 3% decline in income to $27.8 billion, which is at the high end of its $26.2 billion to $28.1 billion guidance range.
It also expects Telstra's EBITDA to be at the high end of the $8.7 billion to $9.4 billion guidance range. The broker has pencilled in EBITDA of $9.27 billion this year.
It is a similar story for underlying EBITDA and NBN one-off earnings, which Goldman has forecast to be $7.58 billion and $1.69 billion, respectively.
And finally, its analysts agree with a number of other brokers and expect Telstra to cut its final dividend down to 8 cents per share. This comprises 3 cents ordinary and 5 cents special dividends.
Mobile, productivity, and asset sales.
In respect to its Mobile division, Goldman has "forecast FY19 Mobile EBITDA of A$3.78bn (-5% vs. pcp). We expect strong postpaid SIO momentum (+400k) as TLS benefits from its plan refresh and 5G network launch, offset by an accelerating postpaid ARPU decline (-2%/-6% in 1H19/2H19). We expect costs will also be high (36% margin) as TLS looks to drive SIO momentum to benefit FY20 earnings."
The broker expects Telstra's work on productivity to result in slower total operating costs growth in the second half, bringing its total operating costs growth to 2.8% for the year.
And finally, Goldman will be looking out for an update on its $2 billion asset sale program. These assets are likely to relate to property and data centres.
Buy rating reaffirmed.
Overall, the broker appears reasonably confident that Telstra will deliver a strong result on Thursday and continues to rate its shares as a buy with a $4.20 price target.
Goldman is also positive on NEXTDC Ltd (ASX: NXT) and has a buy rating and $6.27 price target on the data centre operator's shares.
It is less positive on TPG Telecom Ltd (ASX: TPM). The broker has a neutral rating and $6.76 price target on its shares.
