Rogers Communications Inc. (RCI) – Canada’s largest cable MSO and wireless operator – is scheduled to release its third-quarter 2014 financial numbers on Oct 23, before the opening bell.
In the last reported quarter, the company’s earnings missed the Zacks Consensus Estimate by a margin of 5.00%. Moreover, the company has delivered negative earnings surprises in all the prior four quarters, with an average miss of 7.46%. Let’s see how things are shaping up ahead of this announcement.
Factors Likely to Influence This Quarter
Recently, Rogers landed a 10-year broadcasting deal with WWE Entertainment. Per the agreement, Rogers will be the exclusive distribution partner of all WWE pay-per-view events in Canada. Also, the company has received its first major National Hockey League (NHL) sponsorship from one of Canada’s leading banks, Scotiabank.
On the flip side, Rogers’ cable operations are currently facing intense competition. BCE Inc.’s entry into cable TV services is ramping up competitive pressure and may potentially slash Rogers’ market share and impede margin expansion.
Likewise, Rogers’ Media segment stands affected by continued softness in the advertising market. We believe much of the segment’s growth is dependent on viewership ratings of Rogers’ radio and TV broadcasting operations. Hence, to remain competitive, the company needs to invest heavily in new TV programs and channels. However, this may result in considerable cash drainage.
To add to the woes, a highly leveraged balance sheet, weaker smartphone activations, lower expected operating profit margin in 2014 and stiff competition from other industry players will continue to act as headwinds for the company, moving ahead.
Earnings Whispers?
Our proven model does not conclusively show that Rogers is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here as elaborated below.
Zacks ESP: Rogers has an earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are poised at 81 cents.
Zacks Rank: Rogers has a Zacks Rank #4 (Sell). We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Other Stocks to Consider
Here are some other companies to consider as our model shows they have the right combination of elements to post an earnings beat this quarter.
Ruckus Wireless, Inc. (RKUS) has an earnings ESP of +60.00% and carries a Zacks Rank #3 (Hold).
DragonWave Inc. (DRWI) has an earnings ESP of +16.67% and carries a Zacks Rank #3.
Liberty Interactive Corp. (QVCA) has an earnings ESP of +10.00% and carries a Zacks Rank #3.
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