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Rogers Communications (RCI) Earnings Miss to Hit Stock?

Rogers Communications Inc. RCI posted weak first-quarter 2016 results wherein both the top and the bottom line failed to beat the Zacks Consensus Estimate.

Quarterly net income came in at $180.7 million or 35 cents per share, compared with $208.6 million or 39 cents in the year-ago quarter. Moreover, adjusted earnings per share of 35 cents fell short of the consensus estimate of 40 cents.

Quarterly total revenue stood at $2,365 million, up 2.2% year over year but below the Zacks Consensus Estimate of $2,502 million.

First-quarter adjusted operating profit came in at $802.4 million, down 2% year over year. Quarterly adjusted operating margin was 33.9% compared with 35.4% in the year-ago quarter.

During the first quarter of 2016, Rogers Communications generated $435.8 million of cash from operations, reflecting a whopping increase of 163.4% year over year. Adjusted free cash flow was $160.3 million, down 17.3% year over year.

At the end of the quarter under review, Rogers Communications had no cash and cash equivalents on its balance sheet compared with $8.2 million at the end of 2015. Total outstanding debt stood at $11,980 million against $12,489.2 million at 2015-end. Meanwhile, the debt-to-capitalization ratio was 0.73 flat with the end-2015 figure.

Wireless Segment

Quarterly total revenue came in at $1,377.4 million, up 5.4% year over year. Network revenues totaled $1,263.7 million, up 3.7% from the year-ago quarter. Equipment sales were $113.7 million, up 27.9% year over year.

Quarterly adjusted operating profit for the entire segment was $556.1 million, almost unchanged on a year-over-year basis. Adjusted operating margin was 40.4% compared with 42.6% in the year-earlier quarter. Quarterly consolidated ARPU (average revenue per user) or Blended ARPU was $42.66, down 0.4% year over year. As of Mar 31, 2016, prepaid subscriber base totaled 1.587 million, up 18.4% from the year-ago quarter. Monthly churn rate was 3.65% against 3.99% in the prior-year quarter.

As of Mar 31, 2016, Rogers Communications’ postpaid wireless subscriber base totaled 8.285 million, up 1.8% year over year. In the first quarter, the company added a net of 14,000 postpaid wireless subscribers. Quarterly postpaid ARPA (average revenue per account) was around $81.79, up 4.4% year over year. Monthly churn rate stood at 1.17% against 1.24% in the prior-year quarter.

Cable Segment

Quarterly total revenue came in at $623.9 million, down 1.6% year over year. Services revenues totaled $622.4 million, down 1.6% from the year-ago quarter. Of this, Internet revenues were $262.4 million, up 11.1% year over year. Television (Video) revenues were $287.9 million, down 7.3% year over year. Telephony revenues were $72.2 million, down 16.1% year over year. Equipment Sales stood at $1.5 million, flat year over year.

Quarterly adjusted operating profit for the whole segment was $286.4 million, down 2.2% year over year. Adjusted operating margin came in at 45.9% in the reported quarter, compared with 46.2% in the year-ago quarter.

As of Mar 31, 2016, high-speed Internet subscriber count was 2.064 million, up 3% year over year. In the reported quarter, Rogers Communications added a net of 16,000 high-speed Internet customers. Video subscribers totaled 1.870 million, down 5.7% year over year. The company lost 26,000 video subscribers in the first quarter. Telephony subscriber count stood at 1.08 million, down 4.4%.  The company lost 10,000 telephony subscribers in the first quarter.

Media Segment

Quarterly total revenue came in at $326.5 million, down 3.4% year over year. Quarterly adjusted operating loss was $35.7 million, compared to an operating loss of $26.2 million in the year-ago quarter.

Business Solutions Segment

Quarterly total revenue came in at roughly $70 million, up 2.1% year over year. Services revenues totaled $69.2 million, up 2.2% from the year-ago quarter. Of this, Next-generation revenues were $54.7 million, up 7.1% and legacy revenues were $14.6 million, down 13% year over year. Meanwhile, Equipment revenues totaled $0.73 million, flat on a year-over-year basis. Quarterly adjusted operating profit was $22.6 million, up 10.7% year over year. Adjusted operating margin stood at 32.3% compared with 29.8% in the year-ago quarter.

Outlook

Rogers Communications expects full-year 2016 operating revenues, adjusted operating profit and free cash flow to increase in the band of 1%–3% on a year-over-year basis.

Rogers Communications – which competes with the likes of BCE Inc. BCE, TELUS Corp. TU and Shaw Communications Inc. SJR in Canada – currently carries a Zacks Rank #1 (Strong Buy).

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