Cogeco Communications: Buy, Sell or Hold?

National Bank Financial analyst Adam Shine says Cogeco Communications’ (Cogeco Communications Stock Quote, Chart, News, Analysts, Financials TSX:CCA) growth outlook remains muted as competitive pressure weighs on Breezeline in the United States.

As reported by the Globe and Mail, Shine maintained his “Sector Perform” rating on Cogeco and lowered his target to $69.00 from $70.00 The average target is $73.22.

Shine now expects Q4 revenue of $694-million, down 2.0% year-over-year and slightly below his previous $695-million estimate. He forecasts adjusted EPS of $2.18, down four cents from his prior estimate but up 4.4% from a year earlier.

The analyst noted that Cogeco is entering the final year of its three-year transformation program, but the U.S. competitive environment has been more difficult than expected.

For fiscal 2027, Shine forecasts revenue of $2.71-billion and adjusted EBITDA of $1.35-billion, below Street estimates of $2.73-billion and $1.37-billion.

Cogeco’s Q3 results showed revenue fell 4.7% to $696.7-million, while Adjusted EBITDA declined 3.0% to $351.5-million. Adjusted diluted EPS rose to $2.35 from $1.82 a year earlier.

In Canada, revenue increased 0.5% and Adjusted EBITDA rose 3.9%, while U.S. revenue fell 10.1% and U.S. Adjusted EBITDA declined 10.0%.

CEO Frédéric Perron said Canadian performance remained strong, but U.S. competition intensified, leaving financial improvement slower than expected.

Shine expects another dividend increase, but at a slower pace. After increases of 8% in fiscal 2024 and 7% in fiscal 2025, he assumes a 5% increase for fiscal 2027.

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