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It has been about a month since the last earnings report for Rogers Communication (RCI). Shares have lost about 5.8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Rogers Communication due for a breakout? 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 drivers.
Rogers Communications Q4 Earnings Top, Revenues Fall Y/Y
Rogers Communications reported fourth-quarter 2020 adjusted earnings of 76 cents per share that beat the Zacks Consensus Estimate by 1.3%.
However, total revenues of $2.82 billion missed the consensus mark by 3.5%.
Adjusted earnings declined 1% year over year to C$0.99 per share. Total revenues decreased 6.9% year over year to C$3.68 billion due to decline in Wireless service and equipment revenues as a result of lower subscriber activity attributed to the coronavirus outbreak.
Wireless (62.3% of total revenues) decreased 8.1% from the year-ago quarter to C$2.29 billion as a result of lower roaming revenues due to global travel restrictions during COVID-19 and reduced overage revenues, primarily as a result of continued adoption of Rogers Infinite unlimited data plans.
During the quarter, the company expanded Canada's first and largest 5G network to 160 cities and towns.
Additionally, Rogers started rolling out Canada’s first 5G standalone core network in Montreal, Ottawa, Toronto, and Vancouver to be ready to support future devices and chipsets as they become available.
Service revenues dropped 8.4% to C$1.63 billion, thanks to contraction in prepaid subscriber base and blended average revenue per user (ARPU) 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$50, down 9.5% year over year, primarily as a result of declines in overage and roaming revenues. Meanwhile, monthly blended average billing per user (ABPU) was C$62.8, down 5.1%, primarily as a result of decline in roaming, overage, and other fee revenues due to COVID-19.
As of Dec 31, 2020, prepaid subscriber base totaled almost 1.26 million, highlighting a loss of 142K subscribers from the year-ago quarter. Monthly churn rate was 4.31% compared with 5.58% in the year-ago quarter.
As of Dec 31, 2020, postpaid wireless subscriber base totaled roughly 9.68 million, up 245K from the year-ago quarter driven by strong adoption of Rogers Infinite plans by new customers. Monthly churn rate was 1.19% compared with 1.26% in the year-ago quarter.
Postpaid subscriber growth was driven by increasing number of store openings and an increase in market activity by Canadians.
Segment operating expenses declined 12% from the year-ago quarter to C$1.25 billion.
Adjusted EBITDA decreased 2.8% year over year to C$1.03 billion. Adjusted EBITDA margin expanded 250 basis points (bps) on a year-over-year basis to 45.1%.
Cable revenues (27.7% of total revenues) increased 3.2% year over year to C$1.02 billion due to a 3% increase in ARPA as a result of the movement of Internet customers to Ignite Internet offerings and service pricing changes. Service revenues increased 3.3% year over year to C$1.01 billion.
As of Dec 31, 2020, Internet subscriber count was nearly 2.59 million, up 64K from the year-ago quarter.
During the quarter, Rogers launched Ignite SmartStream, an entertainment add-on for Ignite Internet customers, to give customers access to their favorite streaming services in one place.
Moreover, the company launched 14 new apps and subscription video on-demand services on Ignite TV and expanded free content on Ignite TV with the introduction of apps, including Fun at Home and Health at Home, tubi and XITE.
Ignite TV subscriber count was nearly 544K in the Television segment, reflecting an increase of 218K from the year-ago quarter.
Equipment revenues remained flat year over year at C$3 million.
Segment operating expenses increased 1.8% from the year-ago quarter to C$499 million.
Adjusted EBITDA increased 4.6% year over year to C$520 million. Adjusted EBITDA margin expanded 70 bps on a year-over-year basis to 51%.
Media (11.1% of total revenues) decreased 22.8% from the year-ago quarter to C$409 million, due to lower sports-related and other advertising revenue, primarily as a result of the delayed start of major sports leagues and softness in the overall advertising market attributed to the coronavirus pandemic.
Segment operating expenses decreased 35.6% year over year to C$327 million, primarily attributed to lower sports programming and production costs, as a result of the delayed start of major sports leagues.
Operating costs decreased 13.7% to C$2.09 billion. As a percentage of revenues, operating costs expanded 450 bps to 56.8%.
Adjusted EBITDA increased 3.9% year over year to C$1.59 billion. Adjusted EBITDA margin increased 450 bps to 43.2%.
Balance Sheet & Cash Flow Details
As of Dec 31, 2020, Rogers Communications 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.
Notably, the company had $5.5 billion of available liquidity, including $2.2 billion in cash and cash equivalents and a combined $3.3 billion available under bank credit facility at the end of the previous quarter.
Cash provided by operating activities dropped 18.8% year over year to C$947 million. Free cash flow increased 14.3% year over year to C$568 million.
Rogers Communications paid out C$253 million in dividends in the reported quarter.
The company ended the fourth quarter with a debt leverage ratio (adjusted net debt/adjusted EBITDA) of 3, up 10 bps from the year-ago quarter.
How Have Estimates Been Moving Since Then?
Fresh estimates followed an upward path over the past two months.
Currently, Rogers Communication has a subpar Growth Score of D, a grade with the same score on the momentum front. 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.
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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