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Why Is Rogers Communication (RCI) Down 3.8% Since Last Earnings Report?

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A month has gone by since the last earnings report for Rogers Communication (RCI - Free Report) . Shares have lost about 3.8% 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 its most recent earnings report in order to get a better handle on the important drivers.

Rogers Communications Q2 Earnings Miss, Revenues Rise Y/Y

Rogers Communications reported second-quarter 2021 adjusted earnings of 62 cents per share that missed the Zacks Consensus Estimate by 1.6%.

Total revenues of $2.91 billion however beat the consensus mark by 1.6%.

Adjusted earnings increased 8.5% year over year to C$0.77 per share. Total revenues increased 2.1% year over year to C$3.48 billion largely driven by increase in Cable service revenues.

Wireless Details

Wireless (57.6% of total revenues) increased marginally by 6.7% from the year-ago quarter to C$2.06 billion due to an increase in service revenues.

Service revenues increased 2.4% to C$1.61 billion as a result of a larger postpaid subscriber base, and higher roaming revenues as global travel restrictions were generally less strict than the same period last year.

Equipment revenues were up 25.8% to C$448 million due to higher device upgrades by existing subscribers and higher gross additions.

Monthly blended ARPU was C$49.16, up 0.1% year over year, primarily as a result of a decrease in overage revenues fueled by strong customer adoption of Rogers Infinite unlimited data plans.

Meanwhile, monthly blended average billing per user (ABPU) was C$62.4, up 1.3%, primarily as a result of increase in roaming revenues.

As of Jun 30, 2021, prepaid subscriber base totaled almost 1.176 million, highlighting a loss of 94K subscribers from the year-ago quarter. Monthly churn rate was 3.75% compared with 4.73% in the year-ago quarter.

As of Jun 30, 2021, postpaid wireless subscriber base totaled roughly 9.82 million, up 395K from the year-ago quarter driven by strong adoption of Rogers Infinite plans and an increase in market activity by Canadians. Monthly churn rate was 0.80% compared with 0.77% in the year-ago quarter.

During the quarter, the company expanded Canada's first and largest 5G network, which now reaches more than 700 communities and over 50% of the population. The company plans to extend 5G network availability to more than 1,000 communities, aiming to reach over 70% of the Canadian population by the end of 2021.

In the second quarter, the company launched 5G-enabled fixed wireless access to provide home Internet services to more neighborhoods.

Moreover, Rogers provided 5G connectivity for Canada's first driverless 5G shuttle bus with the University of Waterloo, and Canada's first 5G drone flight with the University of British Columbia and InDro Robotics in the reported quarter.

Further, Rogers for Business teamed up with Apple to help small and medium-sized Canadian businesses improve team communication and collaboration, by offering certain iPhone 12 models on Rogers 5G at no upfront cost.

Segment operating expenses increased 3.9% from the year-ago quarter to C$1.05 billion.

Adjusted EBITDA increased 9.8% year over year to C$1 billion. Adjusted EBITDA margin expanded 140 basis points (bps) on a year-over-year basis to 48.8%.

Cable Details

Cable revenues (28.3% of total revenues) increased 4.9% year over year to C$1.01 billion as a result of disciplined promotional activity and increases in Internet and Ignite TV subscriber base. Service revenues increased 4.8% year over year to C$1.01 billion.

As of Jun 30, 2021, Internet subscriber count was nearly 2.62 million, up 65K from the year-ago quarter.

During the quarter, the company launched Ignite Internet Gigabit 1.5 in select areas, giving customers access to even faster Internet service.

Ignite TV subscriber count was 688K in the Television segment, reflecting an increase of 233K from the year-ago quarter. The company launched three new apps on Ignite TV and Ignite SmartStream during the second quarter, including Spotify, iFood.tv, and Fawesome.tv.

On Jun 28, the company launched 5G outbound roaming in the United States through AT&T and launched inbound roaming for AT&T customers in Canada on Jul 8.

Equipment revenues were up 50% year over year to C$3 million.

Segment operating expenses increased 1.8% from the year-ago quarter to C$521 million.

Adjusted EBITDA increased 8.4% year over year to C$492 million. Adjusted EBITDA margin expanded 160 bps on a year-over-year basis to 48.6%.

Media Details

Media (15.2% of total revenues) increased 84.5% from the year-ago quarter to C$546 million, primarily as a result of higher advertising and Toronto Blue Jays revenues due to the resumption of live sports as coronavirus-induced restrictions were eased.

During the quarter, Rogers delivered record-breaking viewership of the 2021 Stanley Cup Playoffs, including Sportsnet's most-watched Stanley Cup Final in history with an average audience of 3.6 million viewers tuning in to see the Montreal Canadiens and Tampa Bay Lightning compete for the Stanley Cup. Overall, the 2021 Stanley Cup Playoffs reached 26 million or 70% of the Canadian population.

Moreover, the company announced the construction of a new interactive NHL production studio by Sportsnet at its Toronto campus for the 2021-2022 season.

Segment operating expenses jumped 87.6% year over year to C$621 million, primarily attributed to higher sports programming and production costs and Toronto Blue Jays player payroll as a result of the resumption of live sports.

Consolidated Results

Operating costs increased 18.6% to C$2.2 billion. As a percentage of revenues, operating costs expanded 270 bps to 61.6%.

Adjusted EBITDA increased 6.2% year over year to C$1.37 billion. Adjusted EBITDA margin contracted 270 bps to 38.4%.

Balance Sheet & Cash Flow Details

As of Jun 30, 2021, Rogers Communications had $6.9 billion of available liquidity, including $0.9 billion in cash and cash equivalents and a combined $6 billion available under bank credit facility.

Notably, the company had $4 billion of available liquidity, including $0.8 billion in cash and cash equivalents and a combined $3.2 billion available under bank credit facility at the end of the previous quarter.

Cash provided by operating activities dropped 28.9% year over year to C$1.01 billion. Free cash flow decreased 35.5% year over year to C$302 million.

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

The company ended the second quarter with a debt leverage ratio (adjusted net debt/adjusted EBITDA) of 3, which remained unchanged year over year.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -13.17% due to these changes.

VGM Scores

Currently, Rogers Communication has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 20% 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

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, 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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