Shaw Communications’ (TSX:SJR.B) quarterly financials arrived largely in line with expectations, says analyst Rob Goff of Echelon Wealth Partners, who on Friday reiterated his “Buy” rating and $31.00 target price.
Strong results from its wireless division were paired with a $91-million loss for Shaw’s fiscal third quarter ended May 31, 2018. The Calgary-based telecom company saw revenue from its continuing operations of $1.3 billion for the quarter, a 6.9 per cent increase over the previous Q3.
CEO Brad Shaw stated that momentum is building for the company as it expands its wireless retail distribution network across the country.
“We are pleased with another strong quarter of wireless performance as evidenced by over 54,000 postpaid net additions and [average revenue per user] growth of almost 8 per cent compared to a year ago,” Shaw stated in a press release. “Customers continue to reward us by choosing Freedom Mobile as their wireless provider due to our differentiated value proposition led by data-centric service plans.”
Goff notes that Shaw’s wired business (including television, Internet and landlines) for the quarter was modestly off both his and the consensus estimates, coming in with revenue and EBITDA of $1,065 million and $485 million, respectively.
The analyst maintains that while yield stocks have been facing headwinds due to a rising interest rate environment, with its 4.3 per cent dividend yield, Shaw is a relatively defensive stock to own.
“Across its peers, we have ranked Rogers (TSX:RCI.B, $61.82, BUY, PT $72) as our top recommendation. Our view sees both Shaw and Rogers shares benefitting from their underlying wireless exposure and efficiency gains,” says Goff. “We weigh the positive momentum at Freedom against the disappointing wired subscriber growth. We could see solid wired subscriber performance at Rogers as it begins to roll-out its IPTV platform. Both are comparably valued, with Rogers valued at 8.1x C2018 EV/EBITDA against Shaw at 7.7x C2018 EV/EBITDA.”
The analyst has adjusted his forecast for Shaw, moving his FY18 revenue and EBITDA by -$3.5 million and +$20.0 million, respectively, resulting in $5,240 million and $2,066 million, respectively.
Goff’s $31.00 target represents a projected return of 20 per cent at the time of publication.