Rogers Communications (RCI) Q1 Earnings & Revenues Beat

Rogers Communications (NYSE:RCI) delivered adjusted earnings of 71 cents per share that beat the Zacks Consensus Estimate by 11 cents. The figure jumped 40.6% from the year-ago quarter.

Total revenues of $2.88 billion also surpassed the Zacks Consensus Estimate of $2.75 billion and increased 7.8% year over year. This can be attributed to robust performance in the wireless segment and a recovery in the media segment.

Wireless Details

Wireless (60.3% of total revenues) increased 9.4% from the year-ago quarter to $1.73 billion. Service revenues climbed 5.2%, while equipment revenues soared 26.6% in the quarter.

Blended ARPU (average revenue per user) was C$53.68 up from $52.03 in the year-ago quarter but down from C$54.95 in the previous quarter.

As of Mar 31, the prepaid subscriber base totaled almost 1.72 million, a gain of 43K from the year-ago quarter but a loss of 60K subscribers at the end of fourth-quarter 2017. Monthly churn rate was 4.24% as compared with 3.74% in the year-ago quarter.

As of Mar 31, postpaid wireless subscriber base totaled roughly 8.79 billion, a subscriber gain of 182K from the year-ago quarter and 95K from the previous quarter. Monthly churn rate declined to 1.08% from 1.10% in the year-ago quarter and 1.20% in the previous quarter.

Rogers Communications continues to expand LTE coverage through the addition of latest generation 4.5G/5G-ready radio equipment. The company’s technology partnership with Vodafone (NASDAQ:VOD) is aiding it to improve expertise in 5G, IT, and network across consumer and enterprise.

Segment operating expense increased 7.2% from the year-ago quarter to $994.2 million.

Adjusted EBITDA surged 12.7% year over year to $738.7 million.

Cable Details

Cable (26.7% of total revenues) inched up 0.9% from the year-ago quarter to $766.5 million. Service revenues climbed 1.3%, while equipment revenues plunged 60%% in the quarter.

While Internet revenues increased 6.8%, television and phone revenues declined 2.7% and 9.4%, respectively.

As of Mar 31, 2018, the Internet subscriber count was nearly 2.35 million, a gain of 88K from the year-ago quarter and 26K from the end of the previous quarter.

Management stated that its offering of Ignite Gigabit Internet over the entire Cable footprint benefited top-line growth. Increasing demand for speed continues to be a growth driver, as 56% of residential Internet base are now on speeds of 100 Mbps or higher, up from 48% in the year-ago quarter.

Further, the company stated that Ignite TV trials have been completed and it expects a commercial launch later this year.

Rogers Communications lost 68K subscribers on a year-over-year basis and 12K subscribers sequentially to reach an installed base of almost 1.73 million in the Television segment.

Phone subscriber count was nearly 1.12 million, a gain of 21K from the year-ago quarter and 9K from the end of the previous quarter.

Segment operating expense decreased 1.5% from the year-ago quarter to $423.9 million.

Adjusted EBITDA increased 4.1% year over year to $342.5 million driven by favorable product mix shift toward higher margin Internet services.

Media Details

Media (14.6% of total revenues) increased 12.2% from the year-ago quarter to $420.8 million. Per management, revenue growth was driven by “higher distribution to the Toronto Blue Jays from Major League Baseball.”

Segment operating expense increased 1% from the year-ago quarter to $402.6 million.

Adjusted EBITDA was $402.6 million against a loss of $23.7 million in the year-ago quarter.

Consolidated Results

Operating costs increased 4.4% from the year-ago quarter to $1.82 billion. As percentage of revenues, operating costs declined 200 basis points (bps) to 63.1%.

Adjusted EBITDA increased 14% from the year-ago quarter to $1.06 billion. Adjusted EBITDA margin expanded 200 bps from the year-ago quarter, primarily owing to strong growth in revenues and improving cost structure.

Cash Flow Details

Cash provided by operating activities surged 48% year over year to C$885 million. Moreover, free cash flow increased 18% year over year to C$384 million.

Rogers Communications paid C$247 million in dividends and ended the first quarter with a debt leverage ratio (adjusted net debt / adjusted EBITDA) of 2.7.

Zacks Rank & Stocks to Consider

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

Cable One (NYSE:CABO) and Viacom (NASDAQ:VIAB) are stocks worth considering in the same sector. While Viacom carries a Zacks Rank #2 (Buy), Cable One sports Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Cable One and Viacom are currently pegged at 3% and 8.1%, respectively.

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