Should Investors Buy TELUS as Value Clashes With Execution Risks?

TELUS Corporation TU is trading at a valuation discount while its core connectivity and health assets continue to generate cash. That gives value-focused investors a reason to look closer.

The discount comes with material conditions. Leverage remains elevated, earnings expectations have fallen and restructuring needs are rising, leaving the near-term case dependent on execution rather than valuation alone.

TELUS Trades Below Its Historical EV/EBITDA Median

TELUS trades at 7.42X trailing 12-month enterprise value to EBITDA, below the Zacks sub-industry's 8.16X and its five-year median of 8.66X. The stock's Value Score of B reinforces the view that valuation is one of its stronger attributes.

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Peer results show why price alone is not enough. BCE Inc. BCE reported second-quarter 2026 consolidated revenue growth of 1.5% and adjusted EBITDA growth of 1.0%. AT&T Inc. T posted 2.3% revenue growth and 5.2% adjusted EBITDA growth, highlighting the importance of operating execution alongside a lower multiple.

TU Health and Connectivity Still Support Cash Generation

TELUS Health service revenues rose 4% to C$533 million in the second quarter of 2026. Adjusted EBITDA less capital expenditures increased 41% to C$55 million, giving the segment a lower-capital-intensity contribution to consolidated cash generation.

TTech remained comparatively resilient. Mobile network revenue increased 1%, while adjusted EBITDA was nearly unchanged at C$1,639 million despite softer subscriber demand and pricing pressure. That stability matters while TELUS works through weakness in other parts of the portfolio.

TELUS Leverage Keeps the Value Case Conditional

TELUS ended the second quarter with C$26.0 billion of net debt and net debt to adjusted EBITDA of 3.5 times. Its target of about 3.0 times or lower has been pushed to year-end 2028 from 2027, extending the period in which balance-sheet repair remains a central priority.

The 55% quarterly dividend reset is expected to save about C$2.7 billion cumulatively through 2028 for debt reduction. Asset monetization, disciplined capital spending and a moratorium on acquisitions add support, but the path still depends on stronger organic free cash flow.

TU Estimate Cuts Argue for Patience on Earnings

The Zacks Consensus Estimate for current-year earnings has fallen 19.8% over the past four weeks. TELUS also reduced 2026 free cash flow guidance to about C$1.8 billion from C$2.45 billion, reflecting lower adjusted EBITDA, higher capital spending and incremental restructuring cash costs.

TELUS Corporation Price, Consensus and EPS Surprise

TELUS Corporation price-consensus-eps-surprise-chart | TELUS Corporation Quote

Execution risk remains visible. TELUS raised its 2026 restructuring and other cost assumption to about C$900 million, while TELUS Digital continues to face structural pressure in legacy services. Those pressures accompany the valuation discount and keep near-term earnings visibility limited.

TELUS Value Score Outruns Growth and Momentum

The bottom line is that TELUS has identifiable value and cash-generating assets, but the earnings and leverage backdrop keeps the discount from standing on its own. Investors focused on valuation have reasons to monitor the stock, though a clearer improvement in execution would strengthen the case.

TELUS currently carries a Zacks Rank #4 (Sell), alongside a Value Score of B, Growth Score of C, Momentum Score of F and VGM Score of C.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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