The Telstra share price outperformed the ASX 200 in June

The telecommunications giant had a rather healthy finish to FY22.

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Key points

  • Telstra displayed significant outperformance in June compared to the ASX 200
  • The company didn’t announce anything in June that was deemed ‘market sensitive’
  • However, the telco did tell customers it was going to increase mobile prices

The Telstra Corporation Ltd (ASX: TLS) share price has been less volatile than the S&P/ASX 200 Index (ASX: XJO). Australia’s telco has also delivered outperformance compared to the index.

In June 2022, Telstra shares fell by 0.8% while the ASX 200 dropped by 8.9%. An outperformance of around 8% in just one month by a blue chip is quite sizeable.

The performance of an index like the ASX 200 is dictated by the returns of the underlying businesses. BHP Group Ltd (ASX: BHP) and Commonwealth Bank of Australia (ASX: CBA) shares have the biggest impact on the ASX 200 because they are the biggest businesses with the biggest allocations.

However, that doesn’t explain what may have happened for Telstra in June 2022.

Market sensitive announcements

In terms of news out of the company, there weren’t any market-sensitive headlines announced by the business.

The last market-sensitive news out of the company was the announcement of the CEO’s retirement and replacement.

However, there was a headline that could help Telstra’s earnings going forwards. It could have also helped the Telstra share price.

At the start of June, Telstra announced it was going to increase prices for customers. This comes after a long period of intense competition in the telco space, with reducing profit margins.

Telstra said in its announcement:

We know that price rises can be hard and it’s not a decision we take lightly. That’s why we want to be upfront about our plan pricing, so you know what to expect and when.

From 1 July our post-paid mobile and mobile broadband data plans will include an annual review and prices may increase by Consumer Price Index in July each year. This July our mobile plan pricing will increase between $2 and $4 per month in line with CPI. Our mobile broadband data plans have not increased this July.

Investors can now look at the prospect of Telstra’s average revenue per user (ARPU) increasing, which can help grow its earnings.

The market often likes to change a company’s share price, such as the Telstra share price, as expectations around profit growth rise and fade.

Expectations of profit growth

CMC Markets currently has estimates of profit growth over the next couple of financial years.

In its projections, Telstra is expected to generate 13.6 cents of earnings per share (EPS) in FY22. But after that, profit is expected to jump higher in FY23 and FY24. EPS is projected to be 17 cents in FY23 and 18.4 cents in FY24.

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 has positions in 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 Scott Phillips.

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