Media segment growth masks slight weakness in wireless service revenue
Key Numbers
- Q3 Net Profit: $5.75 billion
- One-Time MLSE Gain: $5 billion (non-cash)
- Adjusted EPS: $1.37 (down from $1.42)
- Total Revenue: $5.35 billion (up from $5.13 billion)
Rogers Communications Inc. (TSX:RCI.B) reported a massive third-quarter profit of $5.75 billion, though this headline figure was heavily skewed by a $5-billion one-time, non-cash gain from its acquisition of Maple Leaf Sports & Entertainment (MLSE). While total revenue grew to $5.35 billion, its adjusted earnings per share actually declined to $1.37 from $1.42 a year prior, painting a mixed picture for investors. The company’s media division provided a significant boost, offsetting a slight decline in its core wireless service revenue.
The telecom giant’s results for the quarter ending Sept. 30 were dominated by the accounting gain from acquiring BCE’s stake in MLSE, which made Rogers the majority owner. This single item turned a reported profit of $526 million last year, or 98 cents per share, into a staggering $5.75 billion, or $10.62 per share, in the most recent quarter.
When excluding that $5-billion gain, the underlying operational story changes. Adjusted profit attributable to shareholders was $740 million, a dip from $762 million in the same quarter last year. This highlights that, on a purely operational basis, the company faced some pressure.
Total revenue climbed from $5.13 billion a year earlier, driven almost entirely by the media segment. Media revenue jumped to $753 million from $597 million, thanks to the MLSE deal and higher attendance and gameday revenue from the Toronto Blue Jays. In its core telecom business, wireless service revenue was nearly flat, dipping slightly to $2.06 billion from $2.07 billion. Cable revenue saw a minor increase to $1.98 billion.
With its core wireless service revenue stagnating and adjusted earnings slipping, Rogers appears best suited for long-term, patient investors who believe in the strategic value of its media and sports acquisitions to drive future growth.