Here's what I'm predicting for the Telstra share price in August

Growing profit is a great long-term sign for Telstra shares.

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Key points

  • Telstra is due to hand in its result in mid-August
  • The ASX telco is expected to deliver profit growth over the next few years
  • I think August will be positive for the company if its outlook suggests good revenue growth

The Telstra Group Ltd (ASX: TLS) share price has had a solid year to date, rising by around 8%, as we can see on the chart below.

I think there's every chance that the business can keep rising in August and beyond.

As many readers will know, August is ASX reporting season so all eyes are going to be on what numbers the business is able to achieve in its FY23 result and what commentary the business gives about its outlook.

The business is scheduled to release its result on 17 August 2023, which is in three weeks from now.

Profit estimates

According to Commsec, Telstra is expected to generate 16.5 cents of earnings per share (EPS) in FY23.

Meantime, Goldman Sachs is predicting that Telstra can generate EPS of 16.4 cents in FY23.

If Telstra is able to beat that 16.5 cents EPS figure, it could cause the Telstra share price to rise in response. However, if the company underperforms these figures then it could disappoint the market, causing a decline.

The ASX telco share is expected, according to Commsec, to pay an annual dividend per share of 17 cents, which means that the final dividend per share could be 8.5 cents per share.

This dividend payment alone would be a grossed-up dividend yield of 2.8%.

Outlook for the Telstra share price

I think the biggest factor in how the market reacts will be what the company says the profit outlook is for FY24 and beyond.

Things are looking positive for the company considering it has said in the last two financial years that it was going to increase its telco charges for customers at the rate of inflation. It's also growing its number of subscribers.

This boost to revenue can be a key driver of both net profit after tax (NPAT) and cash flow.

Commsec numbers suggest FY24 EPS could rise by 15% to 19 cents, while Goldman Sachs estimates imply EPS could increase by 12% to 18.4 cents.

For me, one of the most important factors for a company to be able to deliver good shareholder returns is profit growth. Higher profit can drive the Telstra share price higher, particularly if its price/earnings (p/e) ratio stays the same.

It's good news the business is expected to grow EPS in FY24 and FY25 because that could boost investor sentiment and help fund larger dividend payments in the coming years.

Foolish takeaway

It's impossible to know what a share price is going to do in the short term, particularly over one month. If I had to guess, I think August will be a positive month for the Telstra share price. If the market falls then I'd suggest the Telstra share price could outperform because of its defensive earnings profile – nearly everyone uses the internet after all.

As a major company, I think it's one of the more compelling ASX blue chip shares. Certainly, any price falls would make it better value.

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 Group. 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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