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What Awaits Rogers Communications (RCI) in Q4 Earnings?

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Rogers Communications Inc. (RCI), the largest integrated telecom operator in Canada, is slated to report fourth-quarter 2016 results, before the opening bell on Jan 26.

Last quarter, Rogers Communications posted a negative earnings surprise of 10.45%. Moreover, the company’s earnings lagged the Zacks Consensus Estimate in all the previous four quarters, with an average negative surprise of 8.52%.

Moreover, shares of Rogers Communications have underperformed the Zacks categorized Cable TV  industry's growth in the past three months. The stock witnessed a loss of 4.99% compared with the industry’s growth of 8.51% over the same time frame.

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

Factors at Play

We are impressed with Rogers Communications’ efforts to reward its shareholders with quarterly cash dividends. The board of directors declared a quarterly dividend of $0.48 per share on each of its outstanding Class B non-Voting shares and Class A Voting shares. The dividend was paid on Jan 3, 2017 to shareholders of record on Dec 12, 2016.

Moreover, the company continues to remain the first wireless operator in Canada to offer Internet of Things services like End-to-End Incident Management, Farm & Food Monitoring, Level Monitoring, to business enterprises. Meanwhile, its decision to purchase broadcasting company, Tillsonburg Broadcasting Company Limited and offering of Rogers Unison (a new mobile solution) to small businesses also bodes well. We believe these strategic moves are likely to have helped the company in adding high-speed Internet customers.

However, Rogers Communications continues to face tough competition from market incumbents like TELUS Corp. (TU - Free Report) and BCE Inc. (BCE - Free Report) , and other small regional cable TV operators in the wireless market of Canada. Moreover, Shaw Communications Inc.’s entry into the market with the WIND Mobile acquisition has intensified competition. Additionally, the company remains exposed to persistent softness in the advertising market and loss of viewers to video streaming service providers. The accumulating debt and decreasing cash flow may dent the company’s credit ratings going forward. Further, discontinuation of Shomi video streaming services and the dumping of Internet Protocol TV (IPTV) are likely to hinder the company’s growth prospects.

Earnings Whispers

Our proven model does not conclusively show that Rogers Communications is likely to beat on earnings 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) for this to happen. That is not the case here, as you will see 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 are pegged at 54 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

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

We caution investors against the stock going into the earnings announcement, as a Zacks Earnings ESP of 0.00% combined with a Zacks Rank #4 lowers the possibility of an earnings surprise.

Key Pick

Here is a company that has the right combination of elements to post an earnings beat this quarter.

BlackBerry Limited , carries a Zacks Rank #2 and has an Earnings ESP of +50.00%. You can see the complete list of today’s Zacks #1 Rank stocks here.

BlackBerry’s earnings surpassed the Zacks Consensus Estimate in each of the previous four quarters, with an average beat of 62.50%.

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