On today's TSX Breakouts report, there are 35 stocks on the positive breakouts list (stocks with positive price momentum), and 26 securities are on the negative breakouts list (stocks with negative price momentum). The negative breakouts list is dominated by energy stocks.
Discussed today is an industry leader that is on the negative breakouts list.
The share price has been under pressure in recent weeks, falling over 7 per cent since Nov. 21. In the past, a pullback has represented a buying opportunity as the stock's underlying uptrend remains intact. As the stock price continues to fall, its valuation is becoming more compelling.
On Friday, there was unusually high trading volume in the stock. As a result, the selling pressure may not be over quite yet – wait to see the share price stabilize. The security I am referring to is Rogers Communications Inc. (RCI.B-T).
A brief outline is provided below that may serve as a springboard for further fundamental research.
Rogers Communications is Canada's largest wireless provider, and a leading provider of cable television and internet services.
Before the market opened on Oct. 19, the company reported solid third-quarter financial results. Revenue came in at $3.58-billion, up 3 per cent year-over-year. Wireless revenue was strong with the company realizing 129,000 postpaid net additions, its highest level in eight years. Blended average revenue per user (ARPU) climbed to $63.78, up 2 per cent from $62.30 during the same period last year. Postpaid churn (the loss of subscribers) was 1.16 per cent, down from 1.26 per cent last year, and the lowest third quarter churn rate in eight years. Adjusted earnings per share came in at $1.02, surpassing the consensus estimate of $1.00. Management lifted its 2017 guidance for adjusted operating profit growth to between 5 per cent and 6 per cent from its previous guidance of between 2 per cent and 4 per cent.
Earlier this month, Chief Financial Officer Tony Staffieri spoke at the UBS 45th Annual Global Media and Communications conference where he emphasized management's goal of continuing to steadily lower the churn rate, targeting a 1 per cent. He highlighted, "Over the last little while, it's been some of the macro things that have helped churn come down have been things like network quality, network coverage, bill shock, and we've introduced tools to allow customers to better manage and monitor their data usage so there isn't bill shock. One of the areas beyond data that was always problematic was roaming and our product Roam Like Home has gone a long way in making it simpler for consumers to understand when they do travel, what their bill is likely going to be. So very simple fare constructs is what we're focused on and as we think about the next phase of continued churn reduction, which is a focus for us, it's clearly an area of expertise for Joe Natale, our CEO, and there is a lot more we could be doing."
He went on to address the company's improving ARPU and why he believes the growth is sustainable. "Our blended ARPU continues to grow in the 2 per cent to 3 per cent range. It's been largely driven by data usage. We continue to see customers moving up tier into bigger and bigger data buckets, [which] gives them better certainty and in particular, as they move into the more expensive handsets, what we're seeing is they want to have certainty around their bills. In Canada, we continue to have the subsidized model so to some extent the ARPU growth is helped by more expensive handsets as that gets built into the monthly pricing but by far, it's data growth that's driving it on the Share Everything construct that we introduced a few years ago."
With respect to how the fourth-quarter was unfolding, Mr. Staffieri had this to say, "We're seeing, in the fourth quarter, a market that's not dissimilar to what we saw last year, and maybe even a bit more traffic. Certainly, the iPhone X has been driving higher traffic into our distribution points. What we are finding is, especially, in the Canadian market, the price of the iPhone X is causing many to take the iPhone 8, instead…it continues to be a healthy market, not only with iPhone, but we continue to see Android doing well as the traffic moves into the stores."
The company is expected to report its fourth-quarter results before the market opens on January 25. The Street is forecasting earnings per share of 85 cents during the final quarter of 2017.
The stock is dual-listed, trading on both the Toronto Stock Exchange and on the New York Stock Exchange.
Rogers pays its shareholders a quarterly dividend of 48 cents per share, or $1.92 on a yearly basis. This equates to an annualized dividend yield of 3 per cent. Management has maintained its dividend at this level since early 2015.
Its peers, BCE (BCE-T) and Telus (T-T), offer investors higher dividend yields of 4.7 per cent and 4.2 per cent, respectively.
According to Bloomberg, since October, 19 analysts have issued research reports with recommendations, nine of which are buy calls and 10 are hold recommendations.
The average one-year price target is $70.75, implying the share price has 10 per cent upside over the next 12 months. Target prices range from a low of $65 (from the analyst at CIBC World Markets) to a high of $75 (from the analysts at TD Securities and Scotia Capital).
Analysts have been revising their expectations - all higher.
In November, Simon Flannery, the analyst from Morgan Stanley, took his target price up to $71 from $67. Desmond Lau from Veritas Investment Research raised his target price to $72 from $70.
In October, Vince Valentine from TD Securities raised his target price by $3 to $75. Adam Shine from National Bank Financial increased his target price to $71 from $68. Tim Casey from BMO Capital Markets tweaked his target price to $71 from $70. Drew McReynolds from RBC Capital Markets bumped his target price up $2 to $67. Jeffrey Fan, the analyst from Scotia Capital, lifted his target price to $75 from $73. Robert Goff from Echelon Wealth Partners increased his target price to $73 from $70. Arivinda Galappatthige from Canaccord Genuity bumped his target price to $71 from $69. John Hodulik from UBS took his target price up to $72 from $64. David McFadgen from Cormark Securities increased his target price to $72 from $70. David Donovan from Accountability Research raised his target price by $5 to $67 and Phillip Huang from Barclays increased his target price to $72 from $70.
The Street is forecasting earnings per share of $3.48 in 2017, rising 10 per cent to $3.82 in 2018, and forecast to climb nearly 10 per cent to $4.19 in 2019.
Earnings forecasts have steadily increased over the year. For instance, at the beginning of 2017, the consensus earnings estimates were $3.08 for 2017 and $3.34 for 2018. Three months ago, the Street was forecasting earnings per share of $3.44 for 2017 and $3.76 for 2018.
Given the recent pullback in the share price, the stock appears to be reasonably valued.
According to Bloomberg, the stock is trading at an enterprise value-to-earnings before interest, taxes, depreciation and amortization (EV/EBTIDA) multiple of 8.7 times the 2018 consensus estimate, slightly above its three-year historical average multiple of 8.3 times and below its peak multiple of over 9 times.
Shares of Rogers are trading at a slightly premium to its peers BCE and Telus, which are trading at forward EV/EBITDA multiples of 8.6 times and 8.2 times, respectively.
Insider transaction activities
There have been no sizeable transactions in the public market reported by insiders so far in the second half of 2017.
Year-to-date, Rogers' share price is up 24 per cent, sharply outperforming its telecom peers, BCE and Telus, whose stock prices have increased nearly 6 per cent and 12 per cent, respectively.
The stock's positive price momentum has paused. In less than a month, Rogers' share price has fallen over 7 per cent with the stock nearing oversold territory. The relative strength index is at 32. Generally, a reading at or below 30 reflects an oversold condition.
Looking at key support and overhead resistance levels, there is initial downside support around $63, near its 200-day moving average (at $63.36). Failing that, there is strong support around $60. Turning to the upside, there is initial overhead resistance around $68, and after that around $70.
On Friday, over 3.4-million shares traded, well above the three-month historical daily average trading volume of 1.45-million shares. Given the high volume, the share price may remain under pressure in the near-term. As a result, this is a stock to watch until the share price stabilizes.
The Breakouts file is a technical analysis screen intended to identify companies that are technically breaking out. In addition, this report highlights a company's dividend policy, analysts' recommendations, financial forecasts, and provides a brief technical analysis for a security to provide readers with more information.
If a stock appears on the positive breakouts list, this indicates positive price momentum, and that a company may be worthwhile for investors to look at the fundamentals in order to determine if the recent price strength is warranted and will continue. If a security appears on the negative breakouts list, this indicates negative price momentum, and may be indicative of either deteriorating fundamentals or perhaps indicates a buying opportunity.
Securities screened are from the S&P/TSX composite index, the S&P/TSX Small Cap index, as well as Canadian small cap stocks outside of these indexes that have a minimum market capitalization of $200-million.
A technical analysis screen does not replace fundamental analysis, but can help identify companies worth having a closer look at.
|Positive Breakouts||Dec. 15 close|
|ATD.B-T||Alimentation Couche-Tard Inc||$67.15|
|ALS-T||Altius Minerals Corp||$14.64|
|ADW.A-T||Andrew Peller Ltd||$14.40|
|AI-T||Atrium Mortgage Investment Corp.||$12.54|
|BEP.UN-T||Brookfield Renewable Energy Partners LP||$44.24|
|CF-T||Canaccord Genuity Group Inc||$4.96|
|CWX-T||CanWel Building Materials Group Ltd.||$7.28|
|GIB.A-T||CGI Group Inc||$69.48|
|CVG-T||Clairvest Group Inc.||$40.50|
|DRT-T||DIRTT Environmental Solutions||$6.59|
|DRG.UN-T||Dream Global Real Estate Investment Trust||$12.27|
|D.UN-T||Dream Office Real Estate Investment Trust||$22.64|
|ENGH-T||Enghouse Systems Ltd||$58.00|
|FM-T||First Quantum Minerals Ltd||$17.12|
|GCG.A-T||Guardian Capital Group Ltd||$26.14|
|IRG-T||Imvescor Restaurant Group Inc.||$4.23|
|KBL-T||K-Bro Linen Inc.||$42.72|
|LIF-T||Labrador Iron Ore Royalty Corp||$25.22|
|MEQ-T||Mainstreet Equity Corp||$41.00|
|MFI-T||Maple Leaf Foods Inc||$36.57|
|MUX-T||McEwen Mining Inc.||$2.67|
|BCI-T||New Look Vision Group Inc||$36.70|
|NOA-T||North American Energy Partners Inc.||$5.86|
|PLC-T||Park Lawn Corp.||$21.85|
|RFP-T||Resolute Forest Products Inc.||$12.40|
|SRU.UN-T||Smart Real Estate Investment Trust||$31.17|
|STLC-T||Stelco Holdings Inc.||$22.60|
|SVI-T||StorageVault Canada Inc.||$2.70|
|SOX-T||Stuart Olson Inc||$7.05|
|U-T||Uranium Participation Corp.||$4.62|
|AAV-T||Advantage Oil & Gas Ltd||$4.85|
|ARX-T||ARC Resources Ltd||$13.88|
|BXE-T||Bellatrix Exploration Ltd||$1.87|
|BIR-T||Birchcliff Energy Ltd||$3.89|
|CEU-T||Canadian Energy Services & Technology Co||$5.45|
|CU-T||Canadian Utilities Ltd||$37.43|
|CVE-T||Cenovus Energy Inc||$10.86|
|CPG-T||Crescent Point Energy Corp||$8.29|
|CR-T||Crew Energy Inc||$3.16|
|FRU-T||Freehold Royalties Ltd||$13.84|
|HWO-T||High Arctic Energy Services Inc||$3.75|
|III-T||Imperial Metals Corp||$2.25|
|MEG-T||MEG Energy Corp||$4.70|
|MRT.UN-T||Morguard Real Estate Investment Trust||$13.65|
|MPVD-T||Mountain Province Diamonds||$3.42|
|OR-T||Osisko Gold Royalties Ltd||$13.93|
|PONY-T||Painted Pony Energy Ltd||$2.33|
|PSI-T||Pason Systems Inc||$17.06|
|SMT-T||Sierra Metals Inc||$2.75|
|TIH-T||Toromont Industries Ltd||$54.67|
|TOU-T||Tourmaline Oil Corp||$20.66|
|TGL-T||TransGlobe Energy Corp||$1.66|
|WCP-T||Whitecap Resources Inc||$8.35|