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Rogers Communications (RCI) Q1 Earnings: What's in Store?

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Rogers Communications Inc. (RCI - Free Report) is set to release first-quarter 2018 results on Apr 19.

The company beat the Zacks Consensus Estimate in the trailing four quarters, with an average positive surprise of 4.97%. In fourth-quarter 2017, earnings of 69 cents per share outpaced the Zacks Consensus Estimate by a penny.

Although revenues of $2.86 billion lagged the consensus mark, the figure increased 3% year over year driven by solid result from the Wireless segment.

Blended ARPU (average revenue per user) in the Wireless segment was $49.94, higher than $47.79 reported in the year-ago quarter.

Reported under the Cable segment, Internet revenues increased 9% year over year to $325 million. Rogers Communications added 17K high-speed Internet customers and 9K telephony customers in the quarter.

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

Intensifying Competition Hurts

Rogers Communications’ shares have lost 6.8% compared with the industry’s decline of 17% since the announcement of fourth-quarter 2017 results on Jan 25.



The decline, although narrower than industry, can be attributed to stiff competition in wireless and cable segment as well as softness in advertising market that is negatively impacting media revenues.

Rogers Communications faces fierce wireless competition in Canada from large incumbents like TELUS, BCE Inc. (BCE - Free Report) and other small regional carriers. Moreover, Shaw Communications’ decision to venture into the Canadian wireless market with the WIND Mobile acquisition raises competition for Rogers Communications.

Cable operations are also facing increased competition from BCE’s entry into cable TV services. Further, Rogers Communications, like many other cable companies, has lost viewers to video streaming service providers like Netflix. In recent times, the viewership of traditional cable TV players has been significantly impacted by the popularity of on-demand online videos.

The company’s Media segment has been affected by continued softness in the advertising market. To remain competitive, Rogers Communications needs to invest heavily in new TV programs and channels. This may result in considerable cash drain thereby hurting liquidity.

Wireless Strength: Key Catalyst

Rogers Communications is expected to benefit from continuing strong demand for data by consumers and businesses. Improving Wireless penetration rate (87% at the end of the fourth quarter) is anticipated to boost subscriber base.

We are bullish about Rogers Communications' wireless growth from the roll out of 700 MHz LTE lower block spectrum and the offering of Internet of Things (IoT) as a service to business enterprises.

The roll out of lower block spectrum will provide better in-building penetration and rural LTE coverage. The IoT services include End-to-End Incident Management, Farm & Food Monitoring, and Level Monitoring to business enterprises.

Positive Growth Projections

The Zacks Consensus Estimate for Rogers Communications' full-year 2018 earnings of $3.13 per share represents a year-over-year increase of 15.5%. For the upcoming quarterly report, the company’s earnings are expected to grow 29.2% over the year-ago quarter to 62 cents per share.
 

 

The earnings growth is expected to come on the back of solid sales. The consensus sales expectations for the first quarter and full year 2018 are $2.75 billion and $11.81 billion, representing year-over-year growth of 8.9% and 8.3%, respectively.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) along with a positive Earnings ESP has a good chance of beating estimates. The Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.

Rogers Communications has a Zacks Rank #3 and an Earnings ESP of 0.00%, which indicates an unlikely positive surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

Here are a couple of stocks you may consider as our proven model shows that they have the right combination of elements to post an earnings beat this quarter.

Western Digital (WDC - Free Report) has an Earnings ESP of +2.20% and has a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Paycom Software (PAYC - Free Report) has an Earnings ESP of +0.33% and has a Zacks Rank #1.

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