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Will Rogers Communications (RCI) Disappoint in Q4 Earnings?

Zacks Equity Research

Rogers Communications Inc. RCI is scheduled to release fourth-quarter 2017 results, before the opening bell on Jan 25.

The company’s bottom line met the Zacks Consensus Estimate in two of the previous four quarters. Earnings lagged the Zacks Consensus Estimate in the remaining two quarters, with an average beat of 6.04%.

Let’s see how things are shaping up prior to this announcement.

Factors at Play

Rogers Communications faces fierce wireless competition in Canada from large incumbents like TELUS Corp. TU, BCE Inc. BCE and other small regional carriers. Moreover, Shaw Communications Inc.’s SJR decision to venture into the Canadian wireless market with the WIND Mobile acquisition raises competition for Rogers Communications.

Meanwhile, Rogers Communications cable operations are currently facing increased competition. BCE’s entry into cable TV services is increasing competitive pressure and may likely slash Rogers Communications market share and cap margin expansion. BCE is aggressively rolling out IPTV network and offering triple-play services at highly attractive prices, which are quite popular particularly among the low-end market segment.

Moreover, Rogers Communications, similar to other cable companies, has lost viewers to video streaming service providers like Netflix. In recent times, the viewership of traditional cable TV players has been significantly impacted by the popularity of on-demand online videos.

The company’s Media segment has been affected by continued softness in the advertising market. We believe that much of the Media segment’s growth is dependent on the strong viewership ratings of Rogers Communications’ radio and TV broadcasting operations. To remain competitive, the company needs to invest heavily in new TV programs and channels. This may result in considerable cash drain from Rogers Communications’ balance sheet.

Buoyed by such headwinds, Rogers Communications’ shares have lost 4.57% compared with the industry’s gain of 8.96% over the past three months.

On the other hand, Rogers Communications continues to roll out 700 MHz LTE ‘lower block’ spectrum, which provides better in-building penetration and rural LTE coverage. It has become the first wireless operator in Canada to offer “Internet of Things” (IoT) as a service to business enterprises. End-to-End Incident Management, Farm & Food Monitoring and Level Monitoring are the three IoT services that the wireless carrier currently offers.

Rogers Communications has been focusing increasingly on the business enterprise segment. Recently, the company acquired Internetworking to provide enhanced services to its business customers. Additionally, the company also launched Rogers Public Cloud, a cloud infrastructure 'as-a-service' (IaaS) solution that will allow its business customers to securely manage critical data, applications, servers, systems software and network resources over the internet.

Further, the company announced the launch of Rogers Unison service that will allow legacy landline features in a mobile phone. This service is particularly aimed at small businesses. We believe that such innovative service launches for business customers will yield substantial benefits in terms of higher revenues, going forward.

Additionally, Rogers Communications’ subsidiary, Rogers Media, Inc., recently signed a deal to purchase Tillsonburg Broadcasting Company Limited (TBCL). Rogers Media is a diversified media platform which offers radio and television broadcasting, sports entertainment, publishing and digital media properties.

Earnings Whispers

Our proven model does not conclusively show that Rogers Communications is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to beat estimates. Unfortunately, that is not the case here as elaborated below.

Zacks ESP: Rogers Communications has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 68 cents. You can uncover the best stocks to buy or sell before they’re reported with the Earnings ESP Filter.

Zacks Rank: Rogers Communications has a Zacks Rank #4 (Sell).

Notably, we caution against stocks with a Zacks Rank #4 or #5 (Strong Sell) going into the earnings announcement, especially when the company has not witnessed any estimate revisions.

Rogers Communication, Inc. Price and EPS Surprise

Rogers Communication, Inc. Price and EPS Surprise | Rogers Communication, Inc. Quote

Key Pick

BCE Inc. has the right combination of elements to post an earnings beat, when it reports fourth-quarter 2017 results on Feb. 8. BCE has an Earnings ESP of +2.13% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

For BCE, the Zacks Consensus Estimate for fourth-quarter 2017 EPS is currently pegged at 59 cents, indicating year-over-year growth of 3.51%. Similarly, the Zacks Consensus Estimate for fourth-quarter 2017 revenues stands at $4.65 billion, reflecting a year-over-year increase of 8.89%.

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