Stifel Nicolaus analyst Blair Abernethy says Rogers Communications (TSX:RCI.B) Q2 numbers were in line with his expectations, but the potential entry of U.S. heavyweight Verizon entering the Canadian market is dampening his enthusiasm on the name.
Yesterday, before market open, Rogers reported its Q2, 2013 numbers. The company earned $532-million on revenue of $3.2-billion, a topline that was up 3% over the same period last year.
The day before the numbers came out, CEO Nadir Mohamed commented on Verizon, which has made an offer for Wind Mobile and is talking to its tier-two peer, carrier Mobilicity.
“What we’re absolutely against is a tilted or stacked playing field where you have a massive incumbent U.S. carrier that would be given favourable treatment and frankly better treatment than Canadian incumbents,” he said.
“I’ve never seen how a four-player market can work in a country like Canada,” added Mohamed. “I’ve never thought of it as a sustainable model. Frankly, globally, it is interesting. If anything, we’re seeing a market that is consolidating in just about every country. So, Canada by no stretch is an outlier. If anything, three players is the norm.”
Abernethy says Rogers Q2 results caused him to revise his estimates upwards, if only slightly. He now expects the telco will post adjusted earnings of $3.56-million on revenue of $12.63-billion in fiscal 2013. The Stifel Nicolaus analyst says he still rates Rogers as a BUY, but that the “overhang” of Verizon, combined with more conservative assumptions in his long term model means he is lowering his target on the company to $49, down three dollars from his previous target of $52. Abernethy notes that this new target equates to 12.7x his estimate of Rogers’ fiscal 2013 earnings.
At press time, shares of Rogers Communications on the TSX were down 1.3% to $41.41.