On today’s TSX Breakouts report, there are 31 stocks on the positive breakouts list (stocks with positive price momentum), and 28 securities are on the negative breakouts list (stocks with negative price momentum).
Discussed today is a stock that is on the positive breakouts list. The company is an industry leader with robust earnings growth forecast - Rogers Communications Inc. (RCI.B-T).
Year-to-date, the stock has been a laggard. The stock price is up 6 per cent in 2023, matching the return for the S&P/TSX composite index but falling short of the 9-per-cent return for the S&P/TSX communication services [sector] index.
However, the stock may gain traction later this year after earnings results reflect the acquisition of Shaw Communications. The average one-year target price implies a nearly 10-per-cent price return (not including the 3-per-cent dividend yield) - a respectable return relative to its peers.
Based on the current average one-year target prices, the Street is forecasting just a 1-per-cent gain for shares of BCE Inc. (BCE-T), an 11-per-cent return for shares of Telus (T-T), a 6 per cent potential return for shares of Quebecor Inc. (QBR-B-T), and a 23-per-cent rebound rally for shares of Cogeco Communications Inc. (CCA-T), whose stock price is down 14 per cent year-to-date.
A brief outline on Rogers is provided below that may serve as a springboard for further fundamental research when conducting your own due diligence.
Toronto-based Rogers Communications is a leading provider of cell phone service, cable television, and internet services. The company has three main reporting segments: wireless, cable and media.
The stock is dual-listed, trading on both the Toronto Stock Exchange and the New York Stock Exchange.
Quarterly earnings and outlook
Before the market opened on April 26, the company reported better-than-expected first quarter financial results.
Revenue came in at $3.835-billion, up 6 per cent year-over-year. Adjustedearnings before interest, taxes, depreciation and amortization (EBITDA) was $1.65-billion, topping the Street’s expectations of $1.605-billion, and up 7 per cent year-over-year.
Results from the wireless segment were robust. Adjusted EBITDA from its wireless segment rose 9 per cent year-over-year to $1.179-billion. This strength was driven by higher roaming revenue with more people travelling as well as a growing number of subscribers with 95,000 postpaid net additions (up 29 per cent from last year) as Canada’s population expands. Average revenue per user (ARPU) was $57.26, relatively unchanged from $57.25 reported during the same period last year. Postpaid churn (the loss of subscribers) was 0.79 per cent.
Adjusted earnings per share came in at $1.09, surpassing the consensus estimate of 95 cents and up 20 per cent year-over-year.
The share price rallied 2.8 per cent that day on high volume with over 4-million shares traded, well above the three-month historical daily average trading volume of approximately 1.9-million shares.
On the earnings call, chief financial officer Glenn Brandt provided a positive outlook, “Earlier in April, we updated our guidance for 2023 following the close of the Shaw transaction. With our post-close guidance, we anticipate total service revenue growth in the range of 26 per cent to 30 per cent and adjusted EBITDA growth in the range of 31 per cent to 35 per cent. These growth metrics are industry leading versus our national peers for 2023. Our anticipated 2023 capital expenditures will be in the $3.7 billion to $3.9 billion range, and we anticipate free cash flow to grow between $2.0 billion and $2.2 billion for the year. This guidance is strong and reflects the confidence we have in our outlook for 2023 and beyond.”
Rogers pays its shareholders a quarterly dividend of 50 cents per share, or $2 per share on a yearly basis. This equates to a current annualized yield of 3 per cent. Management has maintained its dividend at this level since early 2019.
Its industry peers, BCE and Telus offer investors higher dividend yields of 5.9 per cent and 4.9 per cent, respectively.
According to Bloomberg, 13 analysts have issued research reports since Rogers released its first quarter earnings results. Ten analysts have buy recommendations and threehave neutral recommendations.
The firms providing recent research on the company are: ARC Independent Research, BMO Nesbitt Burns, Canaccord Genuity, CIBC World Markets, Cormark Securities, Desjardins Securities, JP Morgan, Morgan Stanley, Morningstar, National Bank Financial, RBC Dominion Securities, Scotiabank and TD Securities.
In April, most analysts revised their expectations.
- ARC’s Mark Rosen lifted his target price by $4 to $78.
- BMO’s Tim Casey raised his target price by $2 to $72.
- Canaccord’s Aravinda Galappatthige increased his target price to $72 from $68.
- CIBC’s Stephanie Price has a target price of $76, after two increases last month.
- Desjardins’ Jerome Dubreil tweaked his target price to $69 (low on the Street) from $68.
- JP Morgan’s Sebastiano Petti boosted his target price to $90 (high on the Street) from $74.
- Morgan Stanley’s Simon Flannery adjusted his target price to $69 (low on the Street) from $67.
- Morningstar’s Matthew Dolgin lifted his target price by $2 to $75.
- RBC’s Drew McReynolds revised his target price to $70 from $68.
- Scotiabank’s Maher Yaghi raised his target price by $1 to $75.75.
- TD’s Vince Valentini increased his target price to $83 from $80.
The Street is forecasting EBITDA of $8.56-billion in 2023 and $9.87-billion in 2024. The consensus earnings per share estimates are $4.61 in 2023 and $5.54 the following year.
Given the takeover of Shaw Communications Inc., earnings forecasts have jumped. Three months ago, the consensus EBITDA estimates were $6.82-billion in 2023 and $7.86-billion in 2024. The Street was forecasting earnings per share of $4.29 in 2023 and $4.83 in 2024.
Many analysts value the stock using a sum-to-the-part (SOTP) methodology, applying different valuation metrics and multiples to Rogers’ various business segments.
The average one-year price target is $73.73, implying the share price has nearly 10 per cent upside over the next 12 months. Target prices range from a low of $69 (from Desjardins’ Jerome Dubreuil and Morgan Stanley’s Simon Flannery) to a high of $90 (from JP Morgan’s Sebastiano Petti).
Insider transaction activity
Year-to-date, there has not been any trading activity in the public market reported by insiders.
Year-to-date, Rogers’ share price is up 6 per cent, in-line with the S&P/TSX composite index, but below several of its peers. Shares of Quebecor, BCE and Telus have increased 16 per cent, 10 per cent, and over 9 per cent, respectively.
Looking at key technical resistance and support levels, shares of Rogers have initial overhead resistance around $70 and a major ceiling of resistance around $76, near its record closing high of $76.07 set in April 2022. Looking at the downside, there is strong technical support around $60, close to its 200-day moving average (at $60.41).
ESG Risk Rating
According to Sustainalytics, Rogers has an ESG (environmental, social and governance) risk rating of 23.3 as of April 13, 2023. A rating of between 20 and 30 reflects “medium” risk.
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.
This report should not be considered an investment recommendation.