Rogers Communications Inc. (RCI) – Canada’s largest cable MSO and wireless operator – is scheduled to release its fourth-quarter 2014 financial numbers on Jan 29, 2015, before the opening bell.
In the last reported quarter, the company’s earnings missed the Zacks Consensus Estimate by a margin of 17.07%. Moreover, the company has delivered negative earnings surprises in all the prior four quarters, with an average miss of 11.19%. Let’s see how things are shaping up ahead of this announcement.
Factors Likely to Influence this Quarter
Recently, Rogers and BCE Inc. reached an agreement to jointly own Canadian retailer, Glentel Inc. This agreement makes it convenient for customers to purchase Rogers’ products and services across the country. The deal should thus potentially bolster the company’s top line.
Notably, Rogers anticipates adjusted operating profit for full year 2014 in the range of $4,838.5–$4,983.7 million. Moreover, we expect significant LTE network expansion, innovative service launches, major contract wins, strong cable subscriber growth and an attractive dividend yield to boost Rogers' financial results in the coming quarters.
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.
Moreover, Rogers’ Media segment is being 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, drop in postpaid ARPU, high rate of customer churn and stiff competition from local carriers 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, 2 or 3 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 59 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.
Stocks to Consider
Here are some companies that you may consider instead as our model shows they have the right combination of elements to post an earnings beat this quarter:
Cablevision Systems Corporation (CVC) has an earnings ESP of +11.11% and carries a Zacks Rank #3 (Hold).
Time Warner Cable Inc. (TWC) has an earnings ESP of +2.86% and carries a Zacks Rank #3.
Comcast Corporation (CMCSA) has an earnings ESP of +1.30% and carries a Zacks Rank #3.
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