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Rogers Communication (RCI) Up 2.5% Since Last Earnings Report: Can It Continue?

Zacks Equity Research
·7 mins read

A month has gone by since the last earnings report for Rogers Communication (RCI). Shares have added about 2.5% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Rogers Communication due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Rogers Communications Misses on Q2 Earnings, Revenues

Rogers Communications reported second-quarter 2020 adjusted earnings of 43 cents per share that missed the Zacks Consensus Estimate by 27.1%.

Total revenues of $2.27 billion also missed the consensus mark by 5%.

Adjusted earnings decreased 48.3% year over year to C$0.6 per share. Total revenues decreased 16.5% year over year to C$3.15 billion due to decline in Wireless service and equipment revenues as a result of lower subscriber activity attributed to the coronavirus (COVID-19) outbreak.

Notably, second-quarter 2020 results were reported per IFRS 16.

Wireless Details

Wireless (61.3% of total revenues) decreased 13.8% from the year-ago quarter to C$1.93 billion.

During the quarter, the company partnered with the University of British Columbia and the City of Kelowna to launch Canada’s first 5G pilot of smart city transportation technology in the downtown core of Kelowna.

The company was also awarded best wireless network in Canada for the second year in a row by Umlaut, the global leader in mobile network benchmarking. 
Service revenues decreased 13% to C$1.57 billion, attributable to decrease in prepaid subscriber base and blended average revenue per user (ARPU) as a result of lower roaming revenues associated with lower overall roaming activity due to travel barriers and decrease in overage revenues due to faster adoption of Rogers Infinite unlimited data plan launched last quarter.

To combat COVID-19 pandemic, the company waived pay-per-use international roaming fees at all available destinations until Apr 30 and long-distance voice calling fees across Canada from mid-March until at least the end of June for its customers.

Equipment revenues were down 17.4% to C$356 million due to lower gross additions and device upgrades by existing customers as a result of the COVID-19 pandemic. However, this was offset by shift in product mix of device sales toward higher-value devices and lower promotional activities.

Monthly blended ARPU was C$49.1, down 13.5% year over year primarily a result of the declines in overage and roaming revenues. Meanwhile, monthly blended average billing per user (ABPU) was C$61.6, down 8.3% primarily as a result of the declines in roaming, overage, and other fee revenue due to the impacts of COVID-19.

As of Jun 30, 2020, prepaid subscriber base totaled almost 1.27 million, a loss of 181K subscribers from the year-ago quarter. Monthly churn rate was 4.73% compared with 4.43% in the year-ago quarter.

As of Jun 30, 2020, postpaid wireless subscriber base totaled roughly 9.43 million, up 174K from the year-ago quarter driven by strong adoption of Rogers Infinite plans by new customers. Monthly churn rate was 0.77% compared with 0.99% in the year-ago quarter.

Due to COVID-19 outbreak, postpaid subscriber growth was adversely impacted by closed retail locations and reduced promotional activity to protect employees and discourage customer trips to stores.

Segment operating expense decreased 9% from the year-ago quarter to C$1.01 billion.

Adjusted EBITDA decreased 19% year over year to C$918 million. Adjusted EBITDA margin contracted 280 basis points (bps) on a year-over-year basis to 47.5%.

Cable Details

Cable revenues (30.6% of total revenues) declined 3.1% year over year to C$966 million due to bundled pricing constructs that provided home phone for a lower cost and movement of Internet customers to higher speed and waiving certain fees. Service revenues decreased 2.9% year over year to C$964 million.

As of Jun 30, 2020, Internet subscriber count was nearly 2.55 million, up 90K from the year-ago quarter.

During the quarter, the company temporarily removed data usage caps for customers on limited home Internet plans from mid-March until at least the end of June so that they remained informed and connected during quarantine.

Ignite TV subscriber count was nearly 435K in the Television segment, an increase of 280K from the year-ago quarter.

Equipment revenues decreased 50% year over year to C$2 million.

Segment operating expense decreased 1% from the year-ago quarter to C$512 million.

Adjusted EBITDA decreased 5% year over year to C$454 million. Adjusted EBITDA margin contracted 90 bps on a year-over-year basis to 47%.

Media Details

Media (9% of total revenues) declined 49.9% from the year-ago quarter to C$296 million. The decline in revenues was primarily due to lower advertising revenues as a result of softness in the advertising market and lower sports revenues, including at the Toronto Blue Jays, primarily as a result of the suspension of major sports leagues due to lockdown.

During the quarter, the company announced Citytv’s 2020/2021 primetime schedule featuring four new shows and 21 returning series, building on a 37% increase of primetime viewership on Citytv between March and May from last year.

The company provided free access for TV customers to a rotation selection of channels throughout the quarter through to Jun 30.

Segment operating expense decreased 36% year over year to C$331 million, primarily attributed to lower sports-related costs and general operating costs as a result of reduced operating activity and cost efficiencies.

Consolidated Results

Operating costs decreased 13.2% to C$1.86 billion. As a percentage of revenues, operating costs expanded 220 bps to 59%.

Adjusted EBITDA declined 20.9% year over year to C$1.29 billion. Adjusted EBITDA margin contracted 220 bps to 41%.

Other Details

During the quarter, Rogers Partnered with Pflag Canada through Fido brand to provide tablets and free wireless plans to their chapters across Canada, in addition to a donation of $150,000.

Balance Sheet & Cash Flow Details

As of Jun 30, 2020, Rogers Communications had cash and cash equivalents of C$1.8 billion compared with C$1.93 billion at the end of the previous quarter.

Cash provided by operating activities increased 35.2% year over year to C$1.42 billion. Free cash flow decreased 23.3% year over year to C$468 million.

Rogers Communications paid C$252 million in dividends in the reported quarter.

Rogers Communications ended the second quarter with a debt leverage ratio (adjusted net debt/adjusted EBITDA) of 2.9, down 10 bps from the year ago quarter.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -19.49% due to these changes.

VGM Scores

At this time, Rogers Communication has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.


Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Rogers Communication has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.

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