Rogers Communications Inc - Growth & Income

Rogers Communications (RCI) reported second quarter earnings per share of $0.79, beating the Zacks Consensus Estimate by 20%. It was the company's sixth consecutive earnings beat. Analysts have revised their 2010 estimates up to $2.86, representing 14% annual growth.

Company Description

Rogers is a communications and media company based in Toronto, Canada. It operates in the wireless, cable, and media industries. Revenues per segment are divided as follows:

Wireless: 55%

Cable: 32%

Media: 13%

The company was founded in 1920 and has a market cap of $16.8 billion. It recently became a Zacks #2 Rank.

Second Quarter Results

Earnings growth was driven largely by higher operating leverage. The overall operating margin improved to 25.6% in the quarter, up from 20.3% in 2009.

The wireless division is Roger's most profitable with an operating margin of 49.9%, up from 48.5% in the same quarter of 2009. The operating margin for the cable division was essentially flat at 34.3%. The media division (which has a plethora of subsidiaries, including the Toronto Blue Jays) saw operting margins improve from 10.1% to 16.7%.

Total revenue increased a modest 5% from the second quarter of 2009. The wireless division saw sales growth of 5%, while the cable division grew 3%. The media division saw the strongest top-line growth at 8%.

Fundamentals

Rogers continues to produce strong cash flows which it has used to pay dividends and buy back shares. Management repurchased 9.0 million shares in the quarter for a total of $328 million under its $1.5 billion share repurchase agreement.

Rogers also paid $188 million in dividends for the quarter, or $0.32 per share. It currently yields a hefty 3.5%.

Rogers trades at 12.7x forward earnings. Its price to book ratio is 4.1, much higher than the industry average of 1.6, but within reason given its 42% return on equity.

The Zacks Consensus Estimate for 2010 is $2.86, or 14% higher than 2009 earnings per share. The current estimate for 2011 is $3.15, representing 10% growth.

 
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