Rogers Communications Inc. Posts Another Impressive Result With a Strong Q3

Rogers Communications Inc. (TSX:RCI.B)(NYSE:RCI) had a strong third quarter, boosted by its wireless segment.

| More on:
The Motley Fool

Rogers Communications Inc. (TSX:RCI.B)(NYSE:RCI) released its third-quarter results today. The company had a 3% rise in sales along with adjusted earnings per share of $1.02, which was up 23% from last year. The company’s churn rate of 1.16% was the third best that Rogers achieved in eight years, but it was slightly up from the record 1.05% that it saw last quarter.

Let’s have a closer look behind the numbers to see what drove the impressive results for the telecom giant.

Strong growth in its wireless segment

With 129,000 net additions to its wireless postpaid segment, Rogers saw the largest increase to this segment in eight years. With more subscribers and higher-rate plans, the company was able to grow its wireless sales by 5%.

Other segments

The company continues to see higher net losses among its television subscribers with a net loss of 18,000 this quarter, up from 14,000 a year ago. The internet segment saw a net addition of 27,000 customers, and that is 12,000 less than it added a year ago. Net additions in the phone segment were also just 1,000 compared with 5,000 in 2016.

Rogers blames the impact of the CRTC’s decision to reduce access service rates for its poorly performing cable revenue and claims that cable sales would have been up 2% had it not been for this decision.

Decrease in free cash

Rogers saw its free cash flow drop 10%, despite an increase in cash from operations of 16%, as the company spent 20% more this quarter on capital spending, while also seeing more non-cash operating changes.

Net income up 112% due to non-operating results

It may seem impressive at first glance that Rogers was able to double its profits, but the main reason for that increase was that the prior year had $200 million more in other expenses that included losses from investments and winding down shomi. The company’s adjusted net income of $523 million was a more modest, but still impressive, 22% increase.

Increased guidance

The company increased its guidance for 2017 and now expects its operating profit to grow 6%, rather than the 5% that was projected earlier in the year. However, that excess is going to pay for capital spending, which was also saw an increase in its revised total for the year. The net effect will mean that free cash flow still stays within the 2-4% growth that the company expects to see.

What this means for investors

Investors should take note of the company’s struggle to grow its top line in segments outside of wireless. The improved operating results are mainly attributed to the wireless segment, with cable seeing just a 2% increase in adjusted operating profit. This could be a concern as industry gets more competitive, notably with Shaw Communications Inc. recently getting into the wireless space; it is sure to steal some of Rogers’s customers over time.

Is the stock a buy?

At a multiple of over 30 times its earnings, it is difficult to justify investing in Rogers without seeing stronger growth.  BCE Inc. (TSX:BCE)(NYSE:BCE) is comparable in the industry with a bigger market cap, yet its stock trades at less than 19 times earnings. There are better buys in the industry that have stronger growth and pay more in dividends.

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 David Jagielski has no position in any stocks mentioned. 

More on Dividend Stocks

You Should Know This
Dividend Stocks

How to Convert a $300 Monthly Investment Into $338 in Monthly Income

If you want a certain amount in monthly passive income, invest a similar amount today and leave the rest to…

Read more »

Increasing yield
Dividend Stocks

3 Income Stocks With Big Yields to Consider in April 2024

If you haven’t yet made your March investments, here are three income stocks to buy the dip and lock in…

Read more »

Senior Man Sitting On Sofa At Home With Pet Labrador Dog
Dividend Stocks

RRSP Investors: Don’t Miss Out on This Contribution Hack!

This hack has so many benefits for you -- not just when you put it in your RRSP but for…

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Dividend Stocks

Passive Income: 2 Safe Dividend Stocks to Own for the Next 10 Years

Dividend stocks such as Manulife and Fortis can help you generate a stable and recurring passive-income stream.

Read more »

Young woman sat at laptop by a window
Dividend Stocks

3 Dividend Stocks Everyone Should Own for the Long Haul

For investors looking for top-tier dividend stocks to buy and hold for the long term, here are three of my…

Read more »

Payday ringed on a calendar
Dividend Stocks

3 Dividend Stocks That Pay Me More Than $54.57 Per Month

These three dividend stocks have done me well over the years, so let's look at how much I've gotten in…

Read more »

Golden crown on a red velvet background
Dividend Stocks

Dividend Royalty: 3 Fabulous Stocks to Buy Now for Decades of Passive Income

Rogers Communications stock and Canadian Natural Resources stock could pay you dividends for decades to come.

Read more »

Dividend Stocks

The Top Canadian REITs to Buy in April 2024

For growth and dividends this April, look to these two REITs that have quite the promising present as well as…

Read more »