Rogers 4Q Beats on Both Lines

Zacks

Rogers Communications Inc. (RCI) declared better financial results for the fourth quarter of 2012, topping both the top and the bottom lines of the Zacks Consensus Estimate. Following such healthy results, the company plans to buy back shares worth $500 million.

Quarterly net income was $454.3 million or 88 cents per share compared with a net income of $349.5 million or 66 cents per share in the year-ago quarter. The fourth-quarter adjusted EPS was 88 cents, well ahead of the Zacks Consensus Estimate of 73 cents. Quarterly total revenue was $3,256.2 million, up 3% year over year, and also above the Zacks Consensus Estimate of $3,204 million. Such growth in revenue was mainly driven by robust growth in wireless data revenue.

Fourth-quarter operating profit was $1,174.3 million, up 7% year over year. Quarterly operating margin was 36.1% compared with 34.9% in the year-ago quarter.

During the fourth quarter of 2012, Rogers Communications generated $667 million of cash from operations compared with $1,023.5 million in the year-ago quarter. Free cash flow during the reported quarter was a negative $38.9 million compared with $371.5 million in the year-ago quarter.

At the end of fiscal 2012, Rogers Communications had $212.7 million of cash and marketable securities on its balance sheet. Total outstanding debt, at the end of the reported quarter, was $10,425.8 million compared with $10,019.4 million at the end of fiscal 2011. At the end of the fourth-quarter of 2012, debt-to-capitalization ratio was 0.73 compared with 0.74 at the end of fiscal 2011.

Wireless Segment

Quarterly total revenue was $1,917.2 million, up 5% year over year. Network revenue was $1,708.5 million, up 4% year over year. Equipment sales were $208.7 million, up 13% year over year.

Quarterly adjusted operating profit for the entire segment was $686 million, up 3% year over year. Adjusted operating margin was 40.2% in the reported quarter compared with 40.8% in the year-ago quarter. In the fourth quarter of 2012, Wireless Data revenue was $725.9 million, up 21% year over year. Wireless Data revenue represented around 42% of total wireless network revenue compared with 37% in the prior-year quarter.

During the fourth quarter of 2012, Wireless segment activated record 940,000 smartphones, up 18.8% year over year. Most of these smartphones are either iPhone of Apple Inc. (AAPL), Blackberry of Blackberry Ltd. (BBRY) or Google Inc. (GOOG) developed Android-based handsets. Quarterly consolidated ARPU (average revenue per user) was $60.39, up 2.8% year over year.

During the reported quarter, Postpaid retail subscribers’ base was around 7.846 million, up 3.6% year over year. Smartphone customers now constituted a record 69% of the overall Postpaid subscribers compared with 56% in the year-ago quarter. Quarterly Postpaid ARPU was $69.65, up 1.6% year over year. Monthly churn rate was 1.4% compared with 1.49% in the prior-year quarter.

Prepaid subscribers’ base was around 1.591 million, down 9.7% year over year. Quarterly Prepaid ARPU was $15.83, down 6.1% year over year. Monthly churn rate was 3.77% compared with 3.51% in the prior-year quarter.

Cable Segment

Quarterly total revenue was $850.8 million, up 2% year over year. Basic cable operations revenue was $461.3 million, down 0.4% year over year. Internet revenue was $262.6 million, up 4.6% year over year. Home Telephony revenue was $121.8 million, up 2.54% year over year. Quarterly adjusted operating profit for the whole segment was $420.4 million, up 1% year over year. Adjusted operating margin was 49.4% in the reported quarter compared with 48.1% in the year-ago quarter.

At the end of fiscal 2012, Cable TV subscribers’ base was around 3.81 million, up 1.49% year over year. High-speed Internet subscribers’ base was 1.864 million, up 4% year over year. Digital cable terminal base was 1.768 million, down 0.5% year over year. Cable Telephony lines were 1.074 million, up 2.1% year over year.

Media Segment

Quarterly total revenue was $433.4 million, up 1% year over year. Quarterly adjusted operating income was $74.9 million, up 70% year over year. Adjusted operating margin was 17.3% in the reported quarter compared with 10.3% in the year-ago quarter.

Outlook

Rogers Communications has provided guidance that its fiscal 2013 adjusted operating income will be $4,857.9 –$5,042.6 million. After-tax free cash flow will be $2,027–$2,086.9 million. Wireless network revenue will be $6,780.1–$6,949.8 million. Wireless adjusted profit will be $3,090.5 –$3,240.3 million. Cable revenue will be $3,385.1 –$3,464.9 million. Cable adjusted profit will be $1,622.6–$1,672.6 million. Media revenue will be $1,687.5 –$1,747.4 million. Media adjusted profit will be $169.8 million-$194.7 million.

Currently, Rogers Communications has a short-term Zacks Rank #3 (Hold).

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