Shaw Communications Lags on Q3 Earnings - Analyst Blog

Shaw Communications Inc. SJR reported third-quarter fiscal 2014 financial numbers wherein both the top and the bottom line missed the corresponding Zacks Consensus Estimate. Moreover, the company lost a considerable number of video subscribers in the reported quarter.

Following the announcement, Shaw Communications also declared a dividend of $0.28125 on its Cumulative Redeemable Series A, Preferred Shares which will be payable on Sep 30, 2014 to holders of record at the close of business as on Sep15, 2014.

GAAP net income from continuing operations came in at $207.2 million, down 8.8% year over year. Earnings per share stood at 43 cents against 47 in the year-ago quarter. Moreover, adjusted earnings per share for the reported quarter were 44 cents, lagging the Zacks Consensus Estimate by a penny. Quarterly total revenue rose 1.2% year over year to approximately $1,219.7 million. However, the figure missed the Zacks Consensus Estimate.

Quarterly operating income before amortization was around $546.2 million, up 2.7% from the year-ago quarter. Quarterly operating margin stood at 44.8% against 44.1% in the prior-year quarter. In the third quarter of 2014, Shaw Communications generated around $361.7 million of cash from operations, down 3.2% year over year. Free cash flow totaled $144.5 million, up 6% year over year.

At the end of the third quarter, Shaw Communications had cash and marketable securities of $450.8 million and outstanding debt of $4,260.9 million compared with $383.6 million and $3,515.6 million, respectively, at the end of fiscal 2013. The debt-to-capitalization ratio stood at 0.49 compared with 0.47 at the end of fiscal 2013.

Subscribers Statistics

As of May 31, 2014, the Video customer base was 1,977,795, reflecting a net reduction of 12,075 customers in the reported quarter. With the addition of 12,399 customers in this quarter, the company's Internet customer base now stands at 1,918,418. Digital phone lines were 1,374,220, reflecting a year-over-year net addition of 4,834 lines. The DTH customer base totaled 887,229, highlighting a quarterly net reduction of 5,608 customers.

Cable Segment

Quarterly revenues were $768 million, up 2.4% year over year. Quarterly operating income before amortization was $379 million, up 5% year over year.

Satellite Segment

Quarterly total revenue of $200 million was up 0.9% year over year. The segment's quarterly operating income before amortization was $36.4 million, down 2.8% from the year-ago quarter.

Media Segment

Quarterly total revenue came in at $273.6 million, up 5% year over year. Operating income before amortization was $103.6 million, down 1.7% year over year.  

Financial Outlook

For fiscal 2014, management expects both total revenue and operating income before amortization to grow 2–4% year over year. Free cash flow is projected at $650 million.

Shaw Communications currently has a Zacks Rank #3 (Hold) and competes with Canadian telecom and cable MSOs, such as, Rogers Communications Inc. RCI, Telus Corp. TU and BCE Inc. BCE.