Echelon Wealth Partners raises price target on Rogers Communications

Another quarter that bested his expectations is more evidence to support why Rogers Communications (Rogers Communications Stock Quote, Chart, News: TSX:RCI.B) is Echelon Wealth Partners analyst Rob Goff’s favourite Canadian telco.

Rogers yesterday reported its Q1, 2017 results. The company earned $294-million on revenue of $3.33-billion, a topline that was up 2.8 per cent over the $3.24-billion the company generated in the same period last year.

“We are pleased to report strong growth in revenue, adjusted operating profit and free cash flow this quarter, underpinned by impressive subscriber metrics,” said outgoing CEO Alan Horn. “We delivered on all wireless fundamentals, including a substantial reduction in postpaid churn, as we pursue an ever-improving experience for our customers. We see strong uptake of our Ignite Internet offerings and continue to expect positive trends as we leverage our cable competitive advantage. Our results are an excellent start to 2017. We are of course excited to welcome Joe Natale as president and chief executive officer starting tomorrow and look forward to Joe’s leadership in continuing to build on this momentum.”

Goff says both financial and subscriber results bested his expectations. He says he prefers Rogers to its peers for a few reasons.

“With a relatively narrow valuation range, we prefer Rogers ahead of its direct large cap peers given its wireless mix, relatively more mature (or at least not stirred up) competitive balance, together with its positive performance trending and wired product roadmap,” says the analyst. “Telus has a modest valuation discount that we see continuing as investors watch for evidence of competitive discipline in the west given Shaw’s strengthened portfolio.”

In a research update to clients today, Goff maintained his “Buy” rating, but raised his one-year price target on Rogers Communications from $62.00 to $67.00, implying a return of 12.2 per cent at the time of publication.

Goff thinks Rogers will post EPS of $3.34 and EBITDA of $5.30-billion on revenue of $14.17-billion in fiscal 2017.