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Shaw Communications (SJR) Q1 Earnings Miss, Revenues Meet

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Shaw Communications Inc. (SJR - Free Report) reported mixed first-quarter fiscal 2018 (ended Nov 30, 2017) financial results. While the top line met the Zacks Consensus Estimate, the bottom line lagged the same.

Net income from continuing operation was $95.64 million, reflecting an improvement of 29% year over year. Adjusted earnings per share (EPS) of 19 cents lagged the Zacks Consensus Estimate of 25 cents. However, the bottom line rallied 46.2% on a year-over-year basis.

Shaw Communications Inc. Price, Consensus and EPS Surprise

 

Shaw Communications Inc. Price, Consensus and EPS Surprise | Shaw Communications Inc. Quote

Total revenues were $996 million, in line with the Zacks Consensus Estimate. The top line rose 2.1% year over year.

Operating Metrics

First-quarter fiscal 2018 operating income before restructuring costs and amortization was $383.35 million, down 4.6% year over year. Operating margin was 38.5%, down from 41.4% in the year-ago quarter.

Cash Flow

In the quarter under review, Shaw Communications generated $306.05 million cash from continued operations, down 1.3% year over year.

Free cash flow totaled $40.64 million, reflecting a substantial decline of 67.7% year over year. The downside was caused by planned higher capital spending and lower operating income before restructuring costs and amortization.

Liquidity

At the end of first-quarter fiscal 2018, Shaw Communications had cash and total outstanding debt of $354.67 million and $3,426.30 compared with $404.08 million and $3,425.51 million, respectively, at the end of August 2017.

Subscriber Statistics (As of Nov 30, 2017)

In the Consumer segment, the video cable customer base totaled 1,653,269, reflecting a net loss of 18,008 subscribers. Video satellite customer count declined 20,505 to 753,037. Meanwhile, with the addition of 17,694 customers in the quarter, the company's Internet base totals 1,878,703. Digital phone lines grossed 908,113, reflecting a reduction of 17,418 lines.

In the Business Network Service segment, the video cable customer base totaled 50,334, reflecting a net loss of 705 customers in the quarter. Video satellite customers reduced by 512 to 31,023. Further, the company lost 494 Internet customers, taking the tally to 170,150. Digital phone lines grossed 333,296 reflecting an addition of 6,097 lines.  

In the Wireless Segment, postpaid customer base totaled 797,141 reflecting a net addition of 33,050 customers in the reported quarter. The prepaid section gained 1,260 customers taking the total to 384,342 customers.

Wireline Services Segment

Total quarterly revenues grossed $856.78 million in first-quarter fiscal 2018, down 0.4% year over year. Quarterly operating income before restructuring costs and amortization totaled $355.46 million, down 5.9% year over year. Operating margin was 41.5% compared with 43.9% in the prior-year quarter.

Under the Wireline segment, quarterly revenues for the Consumer Segment grossed $745.19 million in first-quarter fiscal 2018, down 1.3% year over year. Quarterly revenues for the Business Network Services segment grossed $111.58 million in first-quarter fiscal 2018, up 6.1% year over year.

Wireless Service Segment

Quarterly revenues grossed $139.48 million in first-quarter fiscal 2018, up 26.8% year over year. Quarterly operating income before restructuring costs and amortization came in at $27.89 million, reflecting an increase of 16.7% year over year. Operating margin was 20% compared with 21.7% in the prior-year quarter.

Financial Outlook

Shaw Communications reaffirmed its previously given guidance for fiscal 2018. Operating income before restructuring costs and amortization is expected to be around C$2.1 billion and free cash flow is expected around C$375 million. Consolidated capital investment is projected at approximately C$1.38 billion. The company expects maximum growth to occur in the consolidated operating income before restructuring costs and amortization, in the second half of the fiscal year.

Zacks Rank

Shaw Communications operates in a highly competitive Canadian wireless market with incumbents like Rogers Communications Inc. (RCI - Free Report) , TELUS Corp. (TU - Free Report) and BCE Inc. (BCE - Free Report) . Stiff competition has resulted in loss in video, Internet and landline phone businesses. Rolling out of new brands, advertising promotions to lure subscribers and technological advancements are likely to escalate expenses. The combined costs will adversely impact margins. Moreover, the company’s cash and liquidity position are a major concern. 

Plagued by such headwinds, the company currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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