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Rogers Drops as Investors Weigh Higher Spending Against Growth

·2 min read

(Bloomberg) -- Rogers Communications Inc. fell as much as 3.2% even after the telecommunications firm reported 14% growth in second-quarter revenue that met analysts’ projections. One analyst attributed its steepest decline since March 17 to potentially higher capital expenditures in the coming months.

National Bank Financial analyst Adam Shine said that company management’s comments during a conference call point to a drop in free cash flow and earnings before interest, taxes, depreciation and amortization in the third quarter due to higher taxes and capital spending.

Key Insights

Rogers said second-quarter revenue rose 14% to C$3.58 billion ($2.8 billion) compared with a year earlier, close to analysts’ average estimates of C$3.56 billion.The result comes as governments across Canada have eased Covid-19 restrictions, with vaccinations accelerating. Rogers, as the country’s largest wireless company by subscribers, is more exposed to the loss of roaming revenue caused by travel restrictions.The Toronto-based company added 99,000 postpaid wireless subscribers. Average revenue per user rose 7 Canadian cents to C$49.16 as a result of higher roaming revenue.Rogers’ profitability met expectations. Adjusted diluted earnings were 76 cents per share, which was in line with the average analyst estimate.“Our solid performance in the second quarter is a result of strong execution across each of our business units as the economy continues to recover from pandemic lockdowns,” Chief Executive Officer Joe Natale said in the release.Natale said during a conference call with analysts that the company is still on track to complete its acquisition of Shaw Communications Inc. by the first half of 2022.“The stock has outperformed its peers since the end of the 1Q reporting season, which we believe was due to the reopening trade,” Desjardins analyst Jerome Dubreuil wrote in a July 12 note to investors.The report comes as the federal government nears an announcement on the results of the 3,500 MHz spectrum auction on July 23. It was previously reported that Canada raised about C$8 billion, a “shockingly high” figure according to one analyst.

Market Reaction

Rogers shares were up 13% this year as of Tuesday’s close, slightly behind the 14.4% gain of the S&P/TSX Composite Index. They were down 3.1% to C$64.91 at 2:41 p.m. in Toronto.

(Updates share price move and more details throughout.)

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