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Shaw Communications Inc.(SJR - Analyst Report) is slated to release its third quarter 2011 results on Wednesday, June 29, before the opening bell. The current Zacks Consensus Estimate for the third quarter is pegged at 40 cents, representing an annualized growth of 11.11%.

With respect to earnings surprises over the trailing four quarters, Shaw Communications has outperformed the Zacks Consensus Estimate in two quarters while it missed the estimate by 3 cents in one quarter and in the last quarter it was in line with the estimate. The average earnings surprise was a positive 1.96%, implying that the company has outdone the Zacks Consensus Estimate by the same magnitude over the last four quarters.

Second Quarter Recap

On April 13, 2011, Shaw Communications reported its second quarter 2011 financial results. Total revenue of $1,223.3 million increased 28.8% year over year and was mostly in line with the Zacks Consensus Estimate of $1,221 million. The year-over-year improvement was primarily attributable to the acquisition of Shaw Media coupled with customer growth and rate increases in the Cable and Satellite segments.

Quarterly operating income before amortization was $505.6 million, up 16.4% year over year. Quarterly operating margin was 41.3% compared with 45.7% in the prior-year quarter.

Quarterly net income was $171 million or 38 cents per share compared with a net income of $142 million or 33 cents per share in the year-ago quarter. Excluding special items, second quarter 2011 adjusted EPS stood at 38 cents, exactly in line with the Zacks Consensus Estimate.

Agreement of Estimate Revisions

In the last 30 days, out of the 6 analysts covering the stock, none increased or decreased their EPS estimates for the third quarter of 2011. Similarly, for the fourth quarter of fiscal 2011, out of the 4 analysts covering the stock, none raised or reduced their EPS estimates over the same period.

For fiscal 2011, in the last 30 days, out of the 7 analysts covering the stock, 2 analysts decreased their EPS estimates while none increased their estimates. Likewise, for fiscal 2012, out of the 7 analysts covering the stock, 2 analysts reduced their EPS estimate while none moved in the opposite direction.

Magnitude of Estimate Revisions

During the last 30 days, the Zacks Consensus Estimates for the third quarter of 2011 and the fourth quarter of 2011 were in line with the current estimate of 40 cents and 35 cents, respectively. Similarly, for fiscal 2011 and 2012, the Zacks Consensus Estimates were in line with the current estimates at $1.51 and $1.63, respectively.

Earning Surprises

In the previous quarter, Shaw Communications reported EPS of 38 cents, which was in line with the Zacks Consensus Estimate. The current Zacks Consensus Estimates for the ongoing quarter as well as for the upcoming quarter contains a 0.00% upside potential (essentially a proxy for future earning surprises). Similarly, for fiscal 2011 and 2012, the Zacks Consensus Estimate upside potential is 0.66% and 0.61%, respectively.

Our Recommendation

Shaw Communications is facing stiff challenges from innovative bundled offerings of Telus Corp.(TU - Analyst Report) and new entrants in the Canadian cable TV market. Although the company has decided to finally launch wireless services in mid-2012, we remain skeptical about its profitability as this sector is already over crowded.

We, thus, maintain our long-term Neutral recommendation for Shaw Communications. Currently, Shaw Communications has a Zacks #4 Rank, implying a short-term Sell rating on the stock.

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