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Shaw (SJR) Up 4.8% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Shaw Communications (SJR). Shares have added about 4.8% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Shaw 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.

Shaw Communications Q4 Earnings Beat, Revenues Flat Y/Y

Shaw Communications reported fourth-quarter fiscal 2020 adjusted earnings from continuing operations of 26 cents per share, beating the Zacks Consensus Estimate by 4%.

Total revenues of $1.01 billion beat the consensus mark by 0.9%.

In domestic currency, the company reported adjusted earnings of C$0.34 per share, up 6.3% year over year. Moreover, total revenues were flat at C$1.35 billion.

Segmental Update

Wireline revenues (78.4% of total revenues) dipped 1.3% on a year-over-year basis to C$1.06 billion.

Wireline - Consumer revenues slid 1.4% to C$917 million, primarily due to decline in Internet, video, satellite and phone revenues.

Wireline - Business revenues of C$140 million, fell 0.7% year over year.

Wireless revenues (21.8% of total revenues) rose 5% on a year-over-year basis to C$294 million.

Wireless - Service revenues (71.8% of total segment revenues) were up 14.7% from the year-ago quarter to C$211 million, primarily driven by increased subscriber base and growing penetration of Big Gig data plans.

Average billing per subscriber unit (ABPU) grew 6.6% year over year to C$44.81, driven by increased number of customers subscribing to higher service plans. ARPU rose 4.2% from the year-ago quarter to C$38.06.

Wireless - Equipment revenues (28.2% of total revenues) declined 13.5% year over year to C$83 million due to lower subscriber sales and activity in the reported quarter as a result of temporary retail store closures.

Subscriber/RGU Details

Wireline RGUs attrition was 71,243 in the reported quarter compared with a loss of roughly 54,361 a year ago.

In the Wireline - Consumer segment, the video cable lost 32,989 subscribers in the three months ended Aug 31, 2020. Video satellite customer count decreased by 7,300. Phone lost 24,762 customers. Moreover, Shaw Communications’ Internet business lost 14,452 customers in the reported quarter.

In the Wireline - Business Network Service segment, the video cable gained 1,680 customers in the reported quarter. Moreover, the company added 1,749 video-satellite customers. Further, Shaw Communications gained 685 phone customers and 4,146 Internet customers.

In the Wireless Segment, Shaw Communications added 59,824 RGUs. While the company added 44,957 post-paid subscribers, it gained 14,867 pre-paid customers.

Post-paid churn of 1.57% in the reported quarter was higher than 1.47% in the year-ago quarter.

Notably, the company now serves approximately 18 million people, almost half of the Canadian population.

Operating Details

Adjusted EBITDA grew 11.2% year over year to C$594 million. Adjusted EBITDA margin expanded 440 bps on a year-over-year basis to 44%.

Segment-wise, Wireline’s adjusted EBITDA increased 5.6% to C$510 million. Wireline segment adjusted EBITDA margin expanded 320 bps on a year-over-year basis to 48.2%.

Wireless adjusted EBITDA jumped 64.7% to C$84 million. Wireless segment adjusted EBITDA margin was 39.8% compared with 27.7% in the year-ago quarter.

Balance Sheet & Cash Flow Details

As of Aug 31, 2020 Shaw Communications had cash worth $763 million.

As of Aug 31, 2020, the company’s net debt position was C$4.55 billion compared with C$4.92 billion as of May 31, 2020.

Moreover, as of Aug 31, 2020, the company’s net debt leverage ratio was 2.3X, lower than management’s optimal range of 2.5X-3X.

In the quarter under review, capital expenditures of C$307 million were down C$75 million year over year. Wireline and wireless capital spending decreased by C$42 million and C$33 million, respectively.

Free cash flow was C$152 million compared with C$42 million in the year-ago quarter.

Guidance

For fiscal 2021, Shaw Communications expects to deliver adjusted EBITDA growth on a year-over-year basis. Capital expenditure and free cash flow is expected to be $1 billion and $800 million, respectively.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.


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