The Motley Fool

Should You Buy or Sell Rogers Communications Inc. Following Mixed First-Quarter Results?

Rogers Communications Inc. (TSX:RCI.B)(NYSE:RCI), one of the largest communications and media companies in Canada, released first-quarter earnings after the market closed on April 20 and its stock responded by rising about 0.5% in the trading session that followed. Let’s take a closer look at the results to determine if we should be long-term buyers today, or if we should wait for a better entry point in the trading sessions ahead instead.

The mixed first-quarter results

Here’s a summary of Rogers’ first-quarter earnings compared to what analysts had anticipated and its results in the same period a year ago.

Metric Reported Expected Year-Ago
Earnings Per Share $0.53 $0.63 $0.66
Operating Revenue $3.18 billion $3.16 billion $3.02 billion

Source: Financial Times

Rogers’ adjusted diluted earnings per share decreased 19.7% and its revenue increased 5.1% compared with the first quarter of fiscal 2014. Rogers’ double-digit decline in earnings per share can be attributed to its adjusted net income decreasing 19.1% to $275 million, and the company noted that this was a direct result of a 7.7% increase in depreciation and amortization, as well as a 3.2% decrease in adjusted operating profit.

Its strong revenue growth can be attributed to revenues increasing in three of its four major segments, led by 26.4% growth to $464 million in its media segment, 3.9% growth to $1.79 billion in its wireless segment, and 1.2% growth to $870 million in its cable segment, while revenues remained unchanged at $94 million in its business solutions segment.

Here’s a quick breakdown of 10 other important statistics and updates from the report compared to the year-ago period:

  1. Total Internet subscribers increased 1.2% to 2 million
  2. Total television subscribers decreased 5.9% to 1.98 million
  3. Total phone subscribers decreased 2.8% to 1.13 million
  4. Total cable homes passed increased 2.4% to 4.09 million
  5. Total service units decreased 2.6% to 5.12 million
  6. Adjusted operating profit decreased 3.2% to $1.12 billion
  7. Adjusted operating profit margin contracted 300 basis points to 35.4%
  8. Free cash flow decreased 25.3% to $266 million
  9. Cash provided by operating activities decreased 44.4% to $227 million
  10. Adjusted net debt increased 19.6% to $15.22 billion

Should you buy shares of Rogers Communications Inc. today?

Even though Rogers’ first-quarter earnings were far from impressive, I do think its stock represents an attractive long-term investment opportunity today because it trades at inexpensive valuations and has a very high dividend yield.

First, Rogers’ stock trades at just 14.1 times fiscal 2015’s estimated earnings per share of $2.99 and only 13.6 times fiscal 2016’s estimated earnings per share of $3.10, both of which are inexpensive compared to the industry average multiple of 24.1 and its long-term growth potential.

Second, Rogers pays a quarterly dividend of $0.48 per share, or $1.92 per share annually, giving its stock a very high 4.6% yield at current levels. The company has also increased its dividend 11 times since 2005, making it one of the top dividend-growth plays in the market today.

With all of the information provided above in mind, I think Rogers represents one of the best long-term investment opportunities in the market today. Foolish investors should take a closer look and strongly consider beginning to scale in to long-term positions.

Just Released! 5 Stocks Under $49 (FREE REPORT)

Motley Fool Canada's market-beating team has just released a brand-new FREE report revealing 5 "dirt cheap" stocks that you can buy today for under $49 a share.
Our team thinks these 5 stocks are critically undervalued, but more importantly, could potentially make Canadian investors who act quickly a fortune.
Don't miss out! Simply click the link below to grab your free copy and discover all 5 of these stocks now.

Claim your FREE 5-stock report now!

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Joseph Solitro has no position in any stocks mentioned. Rogers Communications is a recommendation of Stock Advisor Canada.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.