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Why Is Rogers Communication (RCI) Down 15.3% Since Last Earnings Report?

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It has been about a month since the last earnings report for Rogers Communication (RCI). Shares have lost about 15.3% 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 the most recent earnings report in order to get a better handle on the important catalysts.

Rogers Communications’ Earnings Beat Estimates in Q1

Rogers Communications reported first-quarter 2022 adjusted earnings of 72 cents per share, down 10% year over year.

The Zacks Consensus Estimate for earnings was pegged at 63 cents per share.

Quarterly revenues of $2.87 billion missed the consensus mark by 0.52%

In domestic currency (Canadian dollar), adjusted earnings increased 18% year over year to C$0.91 per share. Total revenues increased 4% year over year, reaching C$3.62 billion.

Wireless Details

Wireless (59.1% of total revenues) increased 3.2% from the year-ago quarter’s levels to C$2.14 billion.

Service revenues increased 7.1% to C$1.72 billion, owing to higher roaming revenues associated with increased traveling and a larger postpaid mobile phone subscriber base.

Equipment revenues were down 10.3% to C$417 million due to fewer device upgrades by existing subscribers and fewer of the new subscribers purchasing devices.
Monthly mobile phone ARPU was C$57.25, up 3.3% year over year, reflecting continued improvements in roaming revenues.

As of Mar 31, 2022, the prepaid subscriber base totaled almost 1.15 million, highlighting a loss of 54K subscribers from the year-ago quarter’s levels. The monthly churn rate was 4.82% compared with 4.36% in the year-ago quarter.

As of Mar 31, 2022, the postpaid wireless subscriber base totaled 8.913 million, up 447K from the year-ago quarter’s levels. The upside can be attributed to strong base management, low postpaid mobile phone churn and increased market activity. The monthly churn rate was 0.71% compared with 0.83% in the year-ago quarter.

Segment operating expenses dropped 0.6% from the year-ago quarter’s levels to C$1.055 billion.

Adjusted EBITDA increased 7.1% year over year to C$1.085 billion. Adjusted EBITDA margin expanded 190 basis points (bps) on a year-over-year basis to 50.7%.

Cable Details

Cable revenues (28.6% of total revenues) inched up 1.6% year over year to C$1.036 billion, driven by a modest price increase across Roger’s Internet base introduced in the last quarter. Service revenues rose 1.2% year over year to C$1.03 billion.

As of Mar 31, 2021, the retail Internet subscriber count was nearly 2.245 million, up 89K from the year-ago quarter’s levels.

As of Mar 31, 2022, total Smart Home Monitoring subscribers reached 109,000, highlighting a loss of 19K subscribers from the year-ago quarter’s tally. Total Home Phone subscriber count was nearly 890,000, down 77K from the year-ago quarter’s figures.

Equipment revenues were up 200% year over year to C$6 million.

Segment operating expenses declined 9% from the year-ago quarter’s figure to C$485 million.

Adjusted EBITDA increased 13.1% year over year to C$551 million. Adjusted EBITDA margin expanded 540 bps on a year-over-year basis to 53.2%.

Media Details

Media (13.3% of total revenues) increased 9.5% from the year-ago quarter to C$482 million due to higher sports-related revenues, including negotiation of certain content rates

Segment operating expenses increased 9.8% year over year to C$548 million, primarily attributed to higher programming, production costs and other general operating costs as a result of the increased activities as COVID-19 restrictions eased, and higher Toronto Blue Jays payroll due to the timing of player trades

Consolidated Results

Operating costs fell 0.8% to C$2.08 billion. As a percentage of revenues, operating costs contracted 260 bps to 57.5%.

Adjusted EBITDA increased 10.6% year over year to C$1.539 billion. Adjusted EBITDA margin expanded 260 bps to 42.5%.

Balance Sheet & Cash Flow Details

As of Mar 31, 2022, Rogers Communications had $3.9 billion of available liquidity, including $0.8 billion in cash and cash equivalents and a combined $3.1 billion available under the bank credit facility.

The company had $4.2 billion of available liquidity, including $0.7 billion in cash and cash equivalents and a combined $3.5 billion available under the bank credit facility at the end of the previous quarter.

Cash provided by operating activities increased 20% year over year to C$813 million. Free cash flow increased 30.7% year over year to C$515 million.

Rogers Communications paid out C$252 million in dividends in the reported quarter.

The company ended the first quarter with a debt leverage ratio (adjusted net debt/adjusted EBITDA) of 3.3 compared with the previous quarter’s debt leverage ratio of 3.4 in the previous quarter.

Guidance

For the full-year 2022, Roger expects total service revenue growth in the range of 4-6% and adjusted EBITDA growth range of 6-8%.

 

How Have Estimates Been Moving Since Then?

It turns out, estimates review flatlined during the past month.

The consensus estimate has shifted -9.18% due to these changes.

VGM Scores

At this time, Rogers Communication has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the second quintile 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.

Outlook

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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