A month has gone by since the last earnings report for Rogers Communication (RCI). Shares have added about 3.7% in that time frame, outperforming 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 Q1 Earnings & Revenues Beat
Rogers Communications reported first-quarter 2021 adjusted earnings of 61 cents per share that beat the Zacks Consensus Estimate by 17.3%.
Total revenues of $2.75 billion beat the consensus mark by 1.8%.
Adjusted earnings increased 8.5% year over year to C$0.77 per share. Total revenues increased 2.1% year over year to C$3.48 billion largely driven by increase in Cable service revenues.
Wireless (59.5% of total revenues) decreased marginally by 0.1% from the year-ago quarter to C$2.07 billion due to a decline in service revenues.
Service revenues dropped 6% to C$1.6 billion, as a result of lower roaming revenues associated with the drop in 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.
Equipment revenues were down 7.2% to C$654 million due to lower device upgrades by existing customers.
Monthly blended ARPU was C$49.09, down 7.1% year over year, primarily as a result of declines in overage and roaming revenues. Meanwhile, monthly blended average billing per user (ABPU) was C$62.1, down 4.6%, primarily as a result of decline in roaming, overage, and other fee revenues due to COVID-19.
As of Mar 31, 2021, prepaid subscriber base totaled almost 1.204 million, highlighting a loss of 132K subscribers from the year-ago quarter. Monthly churn rate was 4.33% compared with 4.98% in the year-ago quarter.
As of Mar 31, 2021, postpaid wireless subscriber base totaled roughly 9.72 million, up 295K from the year-ago quarter driven by strong adoption of Rogers Infinite plans and an increase in market activity by Canadians. Monthly churn rate was 0.88% compared with 0.93% in the year-ago quarter.
During the quarter, the company expanded Canada's first and largest 5G network to 10 more cities, now in 173 markets across Canada, and announced a smart city initiative with Communitech to develop 5G transportation solutions of the future. Rogers expanded the availability of its 5G service in British Columbia, Ontario and Quebec.
On Feb 8, 2021, Rogers announced the introduction of two solutions, Advantage Mobility and Advantage Security for small and medium-sized enterprises (SMEs), designed to provide additional connectivity and security features, by Rogers for Business.
Additionally, Rogers announced that Rogers for Business has expanded its network to more rural communities in British Columbia, leveraging financial support from the provincially funded Connecting British Columbia program and administered by Northern Development Initiative Trust, to provide broadband services to underserved Indigenous, remote and rural communities.
Segment operating expenses increased 1% from the year-ago quarter to C$1.06 billion.
Adjusted EBITDA decreased 1.3% year over year to C$1.01 billion. Adjusted EBITDA margin contracted 60 basis points (bps) on a year-over-year basis to 48.8%.
Cable revenues (29.2% of total revenues) increased 4.8% year over year to C$1.02 billion due to a 4% increase in ARPA attributable to the movement of Internet customers to Ignite Internet offerings and service pricing changes. Service revenues increased 4.8% year over year to C$1.01 billion.
As of Mar 31, 2021, Internet subscriber count was nearly 2.61 million, up 61K from the year-ago quarter.
Ignite TV subscriber count was nearly 602K in the Television segment, reflecting an increase of 185K from the year-ago quarter.
Equipment revenues remained flat year over year at C$2 million.
Segment operating expenses increased 2.5% from the year-ago quarter to C$533 million.
Adjusted EBITDA increased 7.5% year over year to C$487 million. Adjusted EBITDA margin expanded 120 bps on a year-over-year basis to 47.7%.
Media (12.6% of total revenues) increased 6.8% from the year-ago quarter to C$440 million, due to higher sports-related and Today's Shopping Choice revenue, partially offset by softness in the radio advertising market due to COVID-19.
During the quarter, Rogers started offering exclusive English Canada access to more than 300 NHL broadcasts in a condensed 17-week schedule across Sportsnet's TV and streaming platforms this season, with 140 all-Canadian matchups available across the Sportsnet Radio Network.
Midway into the season, audiences for Wednesday Night Hockey are up 56% year over year, while Saturday’s Hockey Night in Canada early game is up 6% and the late game is up 27%.
Segment operating expenses increased 0.4% year over year to C$499 million, primarily attributed to higher sports programming and production costs.
Operating costs increased 0.8% to C$2.09 billion. As a percentage of revenues, operating costs contracted 80 bps to 60.1%.
Adjusted EBITDA increased 4.2% year over year to C$1.39 billion. Adjusted EBITDA margin expanded 80 bps to 39.9%.
Balance Sheet & Cash Flow Details
As of Mar 31, 2021, Rogers Communications had $4 billion of available liquidity, including $0.8 billion in cash and cash equivalents and a combined $3.2 billion available under bank credit facility.
Notably, the company had $5.7 billion of available liquidity, including $2.5 billion in cash and cash equivalents and a combined $3.2 billion available under bank credit facility at the end of the previous quarter.
Cash provided by operating activities dropped 29.2% year over year to C$679 million. Free cash flow decreased 14.7% year over year to C$394 million.
Rogers Communications paid out C$252 million in dividends in the reported quarter.
The company ended the first quarter with a debt leverage ratio (adjusted net debt/adjusted EBITDA) of 3, up 30 bps from the year-ago quarter.
Key Developments in Q1
On Mar 15, 2021, Rogers announced that the company has reached an agreement to acquire Shaw Communications in a transaction valued at around $26 billion, inclusive of nearly $6 billion of debt.
The transaction requires the approval of Shaw's shareholders at a special shareholders meeting to be held on May 20, 2021.
As part of the transaction, the combined companies will invest $2.5 billion to build 5G networks across Western Canada over the next five years and Rogers will commit to establishing a new $1 billion Rogers Rural and Indigenous Connectivity Fund dedicated to connecting rural, remote, and indigenous communities across Western Canada to high-speed Internet and closing critical connectivity gaps faster for underserved areas.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -7.99% due to these changes.
Currently, Rogers Communication has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% 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 this revision indicates a downward shift. Notably, Rogers Communication has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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