As the quarterly earnings season starts, analysts are placing their bets on the companies they follow. This time around, as Canadian carriers prepare to report their fourth-quarter earnings, Rogers seems to be the preferred wireless player of TD Securities analyst Vince Valentini, and he backs his claim with a few hints (via Financial Post).
While Valentini recommends “buy” for both Quebecor (the parent company of Videotron) and Rogers, he prefers the latter, because Rogers shares have been negatively affected by several surprise events in recent months, such as the $500 million IPTV write-down and delay.
Another thing that affected Rogers’ stock price was the telecom regulator’s ruling that forced incumbents to reduce the wholesale rates independent players pay to access their networks. Rogers is also undergoing a leadership transition, and the quarterly earnings call may bring new information about the start date of the incoming CEO Joe Natale.
These factors have pushed Rogers’ stock price down by 9%, which compares to Telus’ 1% gain and Bell’s 3% drop.
Valentini says Rogers could restore investor confidence if it reports a 3% jump in average revenue per user and wireless EBITDA growth of 4%–5%. He also foresees an up to 5% increase in dividends, but the latter may not happen yet, due to the CEO transition, the analyst said.
He also notes that a continuation of high Capex and an increase in debt leverage at Telus in the fourth quarter of 2016 could make Rogers’ relatively conservative dividend growth and debt-reduction strategy more attractive to investors.