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Rogers Communications (RCI) Misses on Q2 Earnings, Revenues

Zacks Equity Research

Rogers Communications RCI reported second-quarter adjusted earnings of 87 cents per share that missed the Zacks Consensus Estimate by a couple of cents.

Total revenues of $2.83 billion also missed the consensus mark of $2.96 billion.

Adjusted earnings however increased 8.4% year over year to C$1.16 per share. Total revenues increased 0.6% year over year to C$3.78 billion.

Investors should note that second-quarter 2019 results were reported per IFRS 16.

Notably, Rogers Media, a subsidiary of Rogers Communications, acquired Vancouver-based podcasting company, Pacific Content during the quarter.

Rogers Communication, Inc. Price, Consensus and EPS Surprise

Rogers Communication, Inc. Price, Consensus and EPS Surprise

Rogers Communication, Inc. price-consensus-eps-surprise-chart | Rogers Communication, Inc. Quote


Wireless Details

Wireless (59.4% of total revenues) increased 1.4% from the year-ago quarter to C$2.24 billion.

Service revenues climbed 3% to C$1.81 billion, attributable to an expanded postpaid subscriber base and increase in the number of customers choosing higher-priced plans.

Equipment revenues were down 4.9% to C$431 million due to lower device upgrades by existing users and decline in gross postpaid subscriber additions owing to softness in the market.

Monthly blended average revenue per user was C$56.73, up 2% year over year. Monthly blended average billings per user was C$67.16, up 3.6%.

As of Jun 30, 2019, prepaid subscriber base totaled almost 1.4 million, a loss of 254K subscribers from the year-ago quarter. Monthly churn rate was 4.43% compared with 3.98% in the year-ago quarter.

As of Jun 30, 2019, postpaid wireless subscriber base totaled roughly 9.2 million, a subscriber gain of 336K from the year-ago quarter. Monthly churn rate declined to .99% from 1.01% in the year-ago quarter. The lower churn rate was due to enhanced customer experience and improved quality of Rogers Communications’ network.

Segment operating expense decreased 5.8% from the year-ago quarter to C$1.12 billion.

Adjusted EBITDA increased 9.6% year over year to C$1.13 billion. Adjusted EBITDA margin expanded 380 basis points (bps) on a year-over-year basis to 50.3%.

Cable Details

Cable (26.4% of total revenues) inched up 0.6% from the year-ago quarter to C$997 million. The increase was due to higher Internet subscriber base and shift of Internet users to higher-usage tiers.

Service revenues climbed 0.5% to C$993 million.

Internet revenues increased 6.5% year over year due to user shift toward higher-GB tiers and increase in subscriber base, partially offset by increased promotional activities. As of Jun 30, 2019, Internet subscriber count was nearly 2.46 million, up 96K from the year-ago quarter.

During the quarter, Rogers Communications launched unlimited data plans with no overage charges. Its Infinite plan with unlimited wireless data starts at $75 for 10GB of high-speed data for every line. Customers requiring more high-speed data will have the option to purchase a Speed Pass for $15 for 3GB.

The company is set to launch new financing options, giving customers more affordable smartphone and device opportunities.

Television revenues were down 0.6% year over year due to decline in subscriber base. This was offset by pricing changes and addition of new Ignite TV subscribers.

Rogers Communications lost 88K subscribers on a year-over-year basis to reach an installed base of almost 1.63 million in the Television segment.

Phone revenues plunged 30.1% year over year primarily due to bundled discount pricing. Subscriber count was nearly 1.1 million, a decline of 24K from the year-ago quarter.

Equipment revenues jumped 33.3% year over year to C$4 million.

Segment operating expense decreased 1.9% from the year-ago quarter to C$519 million.

Adjusted EBITDA increased 3.5% year over year to C$478 million. Adjusted EBITDA margin expanded 130 bps on a year-over-year basis to 47.9%.

Media Details

Media (15.6% of total revenues) declined 2.8% from the year-ago quarter to C$591 million. The decline in revenues was primarily due to the sale of the company’s publishing business and lower Toronto Blue Jays revenues.

Segment operating expense decreased 5.3% year over year to C$519 million primarily attributed to lower publishing-related costs and Toronto Blue Jays player salaries.

Adjusted EBITDA increased 20% year over year to C$72 million.

Consolidated Results

Operating costs declined 4.8% from the year-ago quarter to C$2.15 billion. As a percentage of revenues, operating costs increased 320 bps to 56.7%.

Adjusted EBITDA increased 8.7% from the year-ago quarter to C$1.64 billion. Adjusted EBITDA margin expanded 320 bps to 43.3%.

Balance Sheet & Cash Flow Details

As of Jun 30, 2019, Rogers Communications had cash and cash equivalents of $404 million compared with $264 million at the end of the previous quarter.

Cash provided by operating activities increased 0.9% year over year to C$1.05 billion. However, free cash flow declined 2.4% year over year to C$609 million due to increase in cash income taxes for the reported quarter. This was negated by “lower interest on borrowings.”

Rogers Communications paid C$257 million in dividends in the reported quarter. The company repurchased shares worth $55 million.

Rogers Communications ended the second quarter with a debt leverage ratio (adjusted net debt/adjusted EBITDA) of 3, up from 2.5 at the end of 2018.

Guidance for 2019

Revenues are expected to increase in the range of 3%-5%. Adjusted EBITDA is expected to increase in the range of 7%-9%.

Zacks Rank & Stocks to Consider

Rogers Communications currently carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the broader consumer discretionary sector include Dolby Laboratories DLB, AMC Entertainment AMC and Liberty Global LBTYA. All the three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Dolby Laboratories, Liberty Global and AMC Entertainment are set to report their quarterly earnings on Aug 1, 7 and 8, respectively.

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