Rogers Communications Inc. (TSX:RCI.B)(NYSE:RCI), one of Canada’s largest diversified communications and media companies, announced its third-quarter earnings results and raised its full-year guidance Thursday morning, and its stock responded by falling 1.2% in the day’s trading session. Let’s break down the quarterly results and the fundamentals of its stock to determine if we should be long-term buyers today.
A quality quarterly performance
Here’s a quick breakdown of 10 of the most notable financial statistics from Rogers’s three-month period ended on September 30, 2017, compared with the same period in 2016:
| Metric | Q3 2017 | Q3 2016 | Change |
| Wireless revenue | $2,138 million | $2,037 million | 5.0% |
| Cable revenue | $870 million | $865 million | 0.6% |
| Business Solutions revenue | $97 million | $95 million | 2.1% |
| Media revenue | $516 million | $533 million | (3.2%) |
| Total revenue | $3,581 million | $3,492 million | 2.5% |
| Adjusted operating profit | $1,463 million | $1,385 million | 5.6% |
| Adjusted operating margin | 40.9% | 39.7% | 120 basis points |
| Adjusted net income | $523 million | $427 million | 22.5% |
| Adjusted basic earnings per share (EPS) | $1.02 | $0.83 | 22.9% |
| Free cash flow | $538 million | $598 million | (10.0%) |
Revised guidance for 2017
As a result of its strong operational performance in the first nine months of 2017, Rogers raised its guidance for full-year 2017 adjusted operating profit growth and net additions to property, plant, and equipment, while its guidance for free cash flow and revenue growth remained unchanged. Here’s a breakdown of the company’s new guidance compared with its previous:
| Metric | Previous Guidance | Updated Guidance |
| Revenue growth | 3-5% growth | 3-5% growth |
| Adjusted operating profit | 2-4% growth | 5-6% growth |
| Additions to property, plant, and equipment | $2,250 million | $2,350 million-$2,450 million |
| Free cash flow | 2-4% growth | 2-4% growth |
What should you do with Rogers’s stock now?
I think it was a strong quarter overall for Rogers, and it posted a great performance in the first nine months of 2017, with its revenue up 3.1% to $10.51 billion, its adjusted operating profit up 5.4% to $4.04 billion, its adjusted basic EPS up 24.4% to $2.65, and its free cash flow up 14.4% to $1.50 billion compared with the same period in 2016.
However, Rogers’s third-quarter results came in mixed compared with analysts’ expectations, which called for adjusted EPS of $0.79 on revenue of $2.9 billion, so I think that’s why the stock posted a small decline in Thursday’s trading session.
With all of this being said, I think Rogers represents a great investment opportunity for long-term investors for two fundamental reasons.
First, it trades at attractive forward valuations. Rogers’s stock now trades at 19.5 times fiscal 2017’s estimated EPS of $3.38 and 17.9 times fiscal 2018’s estimated EPS of $3.70, both of which are inexpensive given its current earnings-growth rate and its estimated 8.4% long-term earnings-growth rate, and the latter of which is inexpensive compared with its five-year average price-to-earnings multiple of 19.8.
Second, it has a great dividend. Rogers pays a quarterly dividend of $0.48 per share, equating to $1.92 per share on an annualized basis, giving it a 2.9% yield. The company also has a history of growing its dividend, including 11 annual increases in the last 13 years, and I think its strong growth of free cash flow, including its projected 2-4% growth in 2017, could allow it to announce a slight dividend increase at some point in 2018.
With all of the information provided above in mind, I think Foolish investors should consider initiating long-term positions in Rogers Communications today.
