BofA Upgrades Rogers Communication To Buy

In a report published Wednesday, BofA Merrill Lynch analysts upgraded the rating on Rogers Communications Inc (USA) RCI from Neutral to Buy, with a price target of $39. The upgrade comes in the wake of the recent sell off in RCI shares. "The recent sell off in RCI shares has created what we consider to be an ample margin of safety against further estimate cuts and the likely impacts of the CRTC's wholesale regulatory decision, which we expect next week," the analysts stated. Rogers Communications' shares currently trade at a discount to its peer, reflecting lower current growth. "A surge in wireless subsidy expenses resulted in Roger Communications' 1Q15 EBITDA and EPS missing consensus estimates despite a revenue beat. These expenses are likely to persist unless cost cutting initiatives are undertaken," the analysts mentioned. Rogers Communications is turning around under its new leadership and has seen several service, brand operational and pricing enhancements. This is expected to result in the company's improved operating performance. RCI has the potential to grow its FCF yield substantially (from 6 percent to 10percent by 2020), even without EBITDA growth from Cable and Wireless, through capex normalization at Cable and loss eliminations within Media. "Improved marketing momentum, cost control and a possible network-sharing arrangement with Wind could deliver further upside," the analysts added.