Rogers Profit Drops With Blue Jays Benched and Travelers Stuck

(Bloomberg) -- Rogers Communications Inc.’s second-quarter profit slumped, missing analyst expectations, as the company took a major hit from the closing of stores and the shutdown of professional sports.

The Toronto-based telecommunications company reported net income of C$279 million ($208 million), down 53% from the prior year, as sales and new business activity slowed because of Covid-19. Earnings per share came in at 60 Canadian cents, falling below the average analyst estimate of 71 cents.

The shares were down 5.7% as of 10:20 a.m., the biggest drop since March 23. They’re down 17% this year.

The second quarter was “without doubt the most volatile quarter we’ve seen in our business,” Chief Financial Officer Tony Staffieri said during the earnings conference call.

Revenue slid 17% to C$3.16 billion, largely driven by a 13% decline in wireless service sales as global travel restrictions impacted roaming charges, the company said in a statement Wednesday. It also saw a 17% slump in equipment revenue as 90% of its stores were shuttered during a nationwide lockdown.

The suspension of major sports leagues led to lower advertising sales and sports revenue. Revenue in its media division fell 50%. The company owns the Toronto Blue Jays baseball team as well as a 37.5% stake in Maple Leaf Sports & Entertainment Ltd., which owns teams including the Toronto Maple Leafs, the Toronto Raptors and Toronto FC. Rogers also holds the Canadian broadcast rights for the National Hockey League.

Outlook

After withdrawing its 2020 guidance earlier this year, Rogers said it is still unable to provide updated forecasts.

As the economy gradually reopens and the sports industry slowly resumes, Rogers expects “modest sequential financial and operating improvements” in the third quarter, executives said during the call with analysts. It also anticipates some gradual cost efficiencies to materialize in the quarter ending Sept. 30.

June saw a “notable recovery” in equipment loads as most stores reopened, and July is trending better as well, the company said.

The company declared a dividend of C$0.50 per share and has no plans to change its dividend policy, executives said on the earnings call.

Here’s what analysts said:

• “We believe 2Q will likely see the worst of the pandemic for telcos, and we still believe the sector provides significant value over the longer term,” said Desjardins analyst Maher Yaghi.
• “Rogers Communications’ revenue growth will remain challenged this year as the Covid-19 outbreak affects its business,” Bloomberg Intelligence analyst John Butler said in a report.
• “We expect dividends to be paid throughout 2020” supported by free cash flow of C$468 million along with a “very strong balance sheet with ample access to capital,” BMO Capital Markets analyst Tim Casey said in a note.

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