Rogers Communications Lags on Q1 Earnings - Analyst Blog

Rogers Communications Inc. RCI declared first-quarter 2014 financial results, wherein its bottom line missed the Zacks Consensus Estimate. The company's board of directors raised its annual dividend by 5% to $1.83 per share. The increased dividend of $0.4575 per share will be distributed on a quarterly basis.

Quarterly net income stood at $278.6 million or 52 cents per share compared with $320 million or 62 cents in the year-ago quarter. The figure also missed the Zacks Consensus Estimate of 64 cents. Quarterly total revenue stood at $2,740.7 million, nearly in line with the year-ago quarter number.  

First-quarter operating profit came in at $1,053.6 million, down 2% year over year. Quarterly operating margin was 38.4% compared with 38.9% in the year-ago quarter.

During the first quarter of 2014, Rogers Communications generated $370.3 million of cash from operations compared with $730.5 million in the year-ago quarter. Free cash flow was $323.1 million against $320.3 million in the year- earlier quarter.

At the end of first-quarter fiscal 2014, Rogers Communications had $1,979.3 million of cash and marketable securities on its balance sheet compared with $2,088.2 million at the end of fiscal 2013. Total outstanding debt stood at $12,283.9 million versus $11,047 million at the end of fiscal 2013. The debt-to-capitalization ratio stood at 0.73 compared with 0.72 at the end of fiscal 2013.

Wireless Segment

Quarterly total revenue came in at $1,567.3 million, down 2% year over year. Network revenues totaled $1,484.7 million, down 3% from the year-ago quarter. Equipment sales were $82.6 million, up 18% year over year.

Quarterly adjusted operating profit for the entire segment was $716.9 million, up 3% year over year. Adjusted operating margin was 45.7% in the first quarter of 2014, compared with 43.5% in the year-earlier quarter. Over the same time frame, Wireless Data revenues came in at $757.2 million, up 10% year over year. Wireless Data revenues represented around 51% of the total wireless network revenue against 45% in the prior-year quarter.

During the first quarter of 2014, the Wireless segment activated 579,000 smartphones against 673,000 in the year-earlier quarter. Most of the smartphones were either Apple Inc. AAPL iPhones, Black Berry Ltd. BBRY devices or Google Inc. GOOG developed Android handsets. Quarterly consolidated ARPU (average revenue per user) or Blended ARPU was $52.3, down 3.6% year over year.

During the reported quarter, Postpaid retail subscribers base stood at 8.076 million, up 2.5% year over year. Smartphone customers constituted a record 76% of the overall postpaid subscribers as against 71% in the year-ago quarter. Quarterly Postpaid ARPU was $59.2, down 5.2% year over year. Monthly churn rate stood at 1.2% versus 1.22% in the prior-year quarter.

Prepaid subscriber base totaled 1.356 million, down 10.5% from the year-ago quarter. Quarterly Prepaid ARPU was $12.6, down 5.7% year over year. Monthly churn rate was 3.55% against 4.48% in the prior-year quarter.

Cable Segment

Quarterly total revenue came in at $780.5 million, flat year over year. Basic cable operations revenues totaled $391.1 million, down 6% from the year-ago quarter. Internet revenues were $276.8 million, up 10% year over year. Home Telephony revenues were $109.8 million, down 2% year over year. Quarterly adjusted operating profit for the whole segment stood at $371.2 million, down 5% year over year. Adjusted operating margin stood at 47.6%, in the reported quarter, compared with 49.8% in the year-ago quarter.

At the end of first-quarter fiscal 2014, Cable TV subscriber base stood at 3.990 million, up 4.1% year over year. High-speed Internet subscriber base was 1.98 million, up 4.6% year over year. Digital cable subscriber base now constituted 85% of the total television subscriber base compared with 81% in the year-ago quarter.

Media Segment

Quarterly total revenue came in at $333.1 million, up 8% year over year. Quarterly adjusted operating loss was $21.8 million against $6.4 million in the last-year quarter.

RBS Segment

Quarterly total revenue came in at $85.3 million, up 1.1% year over year. Quarterly adjusted operating profit was $25.4 million, up 18% from the prior-year quarter. Adjusted operating margin stood at 29.8%, in the reported quarter, compared with 24.7% in the year-ago quarter.

Outlook

Rogers Communications expects adjusted operating profit for full-year fiscal 2014 in the range of $4,838.5–$4,983.7 million. The company also expects after-tax free cash flow to be between $1,379 million and $1,451.6 million while capital expenditure for the full year is expected in the band of $2,201.5–$2,298.3 million.

Currently, Rogers Communications has a Zacks Rank #4 (Sell).