Rogers Boosts 2022 Guidance Ahead of Decision on Shaw Deal

(Bloomberg) -- Rogers Communications Inc. rose the most in 13 months after the company lifted its 2022 revenue forecast and said it still expects to close its $16 billion takeover of Shaw Communications Inc. by June. 

Rogers jumped 4.3% to C$76.94 at 1:57 p.m in Toronto, the biggest intraday rise in the stock since the day after it announced the Shaw deal last year. Earlier Wednesday, it traded as high as C$80.85, the highest intraday level on record, after the company said it expects faster business growth from an economic rebound and rising immigration.

Canada’s largest wireless and cable firm earned C$462 million ($368 million) on an adjusted basis in the quarter ended March 31. That equaled 91 Canadian cents per share, beating the average analyst estimate of 83 cents. 

Toronto-based Rogers said it expects service revenue to increase 6% to 8% this year over 2021 levels versus previous guidance of 4% to 6%. It also raised its forecast for free cash flow and for adjusted earnings before interest, taxes, depreciation and amortization. 

“It is not common for telecom companies to increase their outlook this early in the year, which speaks to management’s improved visibility on the company’s operations amid the reopening,” Desjardins analyst Jerome Dubreuil said in a note to investors.  

The company’s proposed acquisition of Calgary-based Shaw is being reviewed by Canada’s antitrust agency and the federal government, with a divestiture of Shaw’s wireless division expected as part of the approval. Rogers wants to sell the division to Xplornet Communications Inc., the Globe and Mail newspaper reported Tuesday.

In March, the Canadian broadcast regulator approved Rogers’ purchase of Shaw’s cable television assets. 

The deal, which the companies are trying to close this quarter, could boost the company’s wireless growth, allowing it to create compelling wireless, pay-television and internet bundles across a broader network footprint, according to John Butler, senior analyst at Bloomberg Intelligence.

Even in the absence of Shaw, Rogers’ wireless growth should improve as it executes better on driving transactions through its digital and retail channels, Butler said, adding that a rebound in travel could boost high-margin roaming fees this year.

“Wireless results were well above our already high expectations,” driven by new customers and higher growth in revenue per user, Scotiabank analyst Jeff Fan said in a note. 

FIRST WORD: Rogers Boosts FY Service Rev. Forecast: Snapshot

Key Numbers

• Revenue was C$3.62 billion, in line with estimates and up 4% from 1Q last year
• Service revenue was C$3.2 billion, up 6%
• Cable revenue up 2%
• Net income on an GAAP basis of C$392 million was up 9%
• Postpaid mobile phone additions were 66,000
• New guidance for annual free cash flow is C$1.9 billion to C$2.1 billion; previous guidance was C$1.8 billion to C$2 billion
• New guidance on adjusted Ebitda is growth of 8% to 10% over last year; previous was 6% to 8%

Market Reaction

• Rogers shares are up about 27% this year versus a 3.9% gain for the S&P/TSX Composite Index.

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