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Shaw (SJR) Up 7.6% 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 7.6% in that time frame, outperforming 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 Q2 Earnings Beat, Revenues Up Y/Y

Shaw Communications reported second-quarter fiscal 2021 adjusted earnings from continuing operations of 34 cents per share, beating the Zacks Consensus Estimate by 30.8%.

Total revenues of $1.09 billion lagged the consensus mark by 1.3%.

In domestic currency, the company reported earnings of C$0.43 per share, up 34.4% year over year. Moreover, total revenues increased 1.8% to C$1.39 billion.

Segmental Update

Wireline revenues (76% of total revenues) dipped 0.8% on a year-over-year basis to C$1.54 billion.

Wireline - Consumer revenues slid 1.1% to C$909 million. Wireline - Business revenues of C$145 million were up 0.7% year over year.

Wireless revenues (24.2% of total revenues) increased 11.3% on a year-over-year basis to C$336 million.

Wireless - Service revenues (64.9% of total segment revenues) were up 8.5% from the year-ago quarter to C$218million.

ABPU fell 6.5% year over year to C$40.98, driven by Shaw’s bundled growth strategy through the acquisition of lower-revenue Shaw Mobile customers. ARPU also declined 4.2% from the year-ago quarter to C$36.82.

Wireless - Equipment revenues (35.1% of total revenues) increased 16.8% year over year to C$118 million.

Subscriber/RGU Details

Wireline RGUs declined by 66,030 in the reported quarter compared with a loss of roughly 50,505 a year ago.

In the Wireline - Consumer segment, the video cable lost 26,497 subscribers in the three months ended Feb 28, 2021. Video satellite customer count decreased by 13,508. Phone lost 20,418 customers. Moreover, Shaw Communications’ Internet business lost 5,425 customers in the quarter.

In the Wireline - Business Network Service segment, the video cable gained 330 customers in the reported quarter. However, the company lost 1,903 video-satellite customers. Moreover, Shaw Communications gained 1,022 phone customers and 369 Internet customers.

In the Wireless Segment, Shaw Communications added 82,297 net RGUs. While the company added 75,069 post-paid subscribers, it gained 7,228 pre-paid customers.

Post-paid churn of 1.25% in the reported quarter was lower than 1.57% in the year-ago quarter.

Operating Details

In second-quarter fiscal 2021, operating, general & administrative expenses slipped 1.7% year over year to C$750 million. Operating, general & administrative expenses, as a percentage of revenues, decreased 190 basis points (bps) to 54.1%.

Adjusted EBITDA grew 6.2% year over year to C$637 million. Adjusted EBITDA margin expanded 190 bps on a year-over-year basis to 45.9%.

Segment-wise, Wireline’s adjusted EBITDA increased 4% to C$540 million. Wireline segment’s adjusted EBITDA margin expanded 240 bps on a year-over-year basis to 51.2%.

Wireless adjusted EBITDA climbed 19.8% to C$97 million. Wireless segment adjusted EBITDA margin increased 420 bps to 44.5%.

Balance Sheet & Cash Flow Details

As of Feb 28, 2021, Shaw Communications had cash worth $388 million. Moreover, the company’s net debt position was C$5.80 billion.

Moreover, the company’s net debt leverage ratio was 2.4X, below management’s optimal range of 2.5X-3X.

In the quarter under review, capital expenditures were C$250 million compared with C$234 million in the previous quarter.

Wireline capital spending decreased by C$44 million year over year to C$161 million. Wireless spending increased by C$18 million year over year to C$73 million due to continued network expansion, spectrum deployment and higher IT-related spending in order to support Shaw Mobile launch and digital initiatives.

Free cash flow was C$248 million compared with C$225 million in the previous quarter and $250 million in the year-ago quarter.

Guidance

For fiscal 2021, Shaw Communications still expects to deliver adjusted EBITDA growth on a year-over-year basis. Free cash flow is still expected to be $800 million.

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.

VGM Scores

Currently, Shaw has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

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

Outlook

Shaw has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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