Shaw Communications Beats in 1Q '12 - Analyst Blog
January 13 2012 - 3:00AM
Zacks
Shaw Communications
Inc. (SJR) declared its first quarter of fiscal 2012
financial results, beating the Zacks Consensus Estimates. Net
income for the reported quarter was $200 million or 43 cents per
share compared with a net income of $17 million or 3 cents per
share in the prior-year quarter. Adjusted EPS of 46 cents was a
penny higher than the Zacks Consensus Estimate.
Quarterly total revenue of
approximately $1,266 million was up 19% year over year and was well
above the Zacks Consensus Estimate of $1,218 million. The
year-over-year improvement was primarily attributable to the
acquisition of the Shaw Media coupled with customer growth and rate
increases in the Cable and Satellite segments.
Quarterly operating income before
amortization was around $560 million, up 18% year over year.
Quarterly operating margin was 44.2% compared with 44.4% in the
prior-year quarter. In the first quarter of 2012, Shaw
Communications generated $306 million of cash from operations
compared with $65 million in the year-ago quarter. Free cash flow
in the reported quarter was approximately $95 million compared with
a negative $143 million in the year-ago quarter.
At the end of the first quarter of
fiscal 2012, Shaw Communications had cash & cash equivalents of
$360 million compared with $456.2 million at the end of fiscal
2011. At the end of the reported quarter, Shaw Communications had
$5,205 million of outstanding debt compared with $5,407.4 million
at the end of fiscal 2011. Debt-to-capitalization ratio at the end
of the first quarter was 0.56 compared with 0.60 at the end of
fiscal 2011.
Subscribers
Statistics
At the end of the first quarter of
fiscal 2012, Basic Cable customer base was 2,267,007, reflecting
net reduction of 22,768 year over year. Digital TV customer base
was 1,878,954, representing a net addition of 59,566 year over
year. Digital TV penetration rate is now 82.9% of basic TV.
Internet customer base stood at 1,887,916, reflecting net addition
of 10,685 year over year. Digital phone lines were 1,256,010,
reflecting year-over-year net addition of 22,969. DTH customer base
was 909,414, representing net addition of 531 year over year.
Cable Segment
Quarterly revenue was $784 million,
up 4% year over year. Strong revenue growth was attributable to
subscriber addition and rate increases. Quarterly operating income
before amortization was $373 million, up 7% year over year.
Satellite
Segment
Quarterly total revenue of $207
million was up 1% year over year. Within this segment, DTH
revenue was $187 million, up 2% year over year and Satellite
Services revenue was $20 million, down 5% year over year. The
segment’s quarterly operating income before amortization was $68
million, remaining same year over year.
Media Segment
Quarterly total revenue was $296
million, down 3% year over year. Operating income before
amortization was $199 million, down 8% year over year.
Dividend
Increased
The board of directors of Shaw
Communications has authorized a 5% hike in its annual dividend to
$0.97 per share. Shaw Communications’ dividends are declared and
paid on a monthly basis and this increase will commence on March
29, 2012.
Our
Recommendation
In September 2011, Shaw
Communications decided to put aside its much-hyped plan to enter
into the wireless market of Canada. The company offers triple-play
cable TV and satellite TV, Internet, and wireline phone services,
whereas its main competitor Telus Corp. (TU)
offers Cable TV, Internet, wireline, and wireless services. Telus
shares a national wireless network with Bell Canada, a division
of BCE Inc. (BCE). Its popular Optik TV
offering IPTV services is quickly eroding Shaw Communications’
market share. Currently, Shaw Communications lacks a major
competitive weapon, which is its wireless service.
We maintain our long-term Neutral
recommendation on Shaw Communications. Currently, Shaw
Communications has a Zacks #4 Rank, implying a short-term Sell
rating on the stock. This was primarily due to the increasing loss
of video susbcribers.
BCE INC (BCE): Free Stock Analysis Report
SHAW COMMS-CL B (SJR): Free Stock Analysis Report
TELUS CORP (TU): Free Stock Analysis Report
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