Shaw Communications (SJR) Beats On Q4 Earnings, Revenues Lag

Shaw Communications Inc. (NYSE:SJR) reported mixed fourth-quarter fiscal 2017 (ended Aug 31, 2017) financial results. While the top line missed the Zacks Consensus Estimate, the bottom line surpassed the same.

Net income from continuing operation came in at $384 million, reflecting a massive 262.3% year-over-year increase. Adjusted earnings per share (EPS) of 24 cents outpaced the Zacks Consensus Estimate by a penny.

Total revenues came in at $992 million, reflecting a decrease of 1% year over year and missing the Zacks Consensus Estimate of $999 million.

Operating Metrics

Fourth-quarter fiscal 2017 operating income before restructuring costs and amortization was $383.2 million, decreasing 6.8% year over year. Operating margin came at 38.5%, down from 42.4% in the year-ago quarter.

Cash Flow

In the fourth quarter of fiscal 2017, Shaw Communications generated $185.6 million cash from continued operations, down 19.7% year over year. Free cash flow came in at $1.6 million, reflecting a substantial decline of 77.8% year over year. The decrease can be largely attributed to higher planned capital expenditures and the loss of free cash flow in the prior year by the former Media division, which was sold on Apr 1, 2016. This was partially offset by lower cash taxes and higher dividends from equity accounted associates.

Liquidity

At the end of fiscal 2017, Shaw Communications had cash and total outstanding debt of $405.6 million and $3,440 compared with $545.5 million and $7,186.3 million, respectively, at the end of Aug 2016. At fiscal 2017 end, the debt-to-capitalization ratio was 0.41 compared with 0.48 at fiscal 2016 end.

Subscriber Statistics (As of Aug 31, 2017)

In the Consumer segment, the video cable customer base totaled 1,671,277,reflecting a net addition of 7,567subscribers in the quarter under review. Video satellite customer count decreased 6,332to 773,542. Meanwhile, with the addition of 22,045customers in the quarter, the company's Internet base now stands at 1,861,009. Digital phone lines grossed 925,531, reflecting a decrease of 4,535 lines.

In the Business Network Service segment, the video cable customer base totaled 51,039, reflecting a net loss of 2,483 customers in the quarter. Video satellite customers increased 544 to 31,535. Further, the company lost 2,065 Internet customers, taking the tally to 170,644. Digital phone lines grossed 327,199 reflecting an addition of 7,562 lines.

In the Wireless Segment, postpaid customer base totaled 764,091 reflecting a net addition of 29,089 customers in the reported quarter. The prepaid section gained 11,925 customers taking the total to 383,082 customers.

Consumer Segment

Quarterly revenues grossed $749.6 million in fourth-quarter fiscal 2017, increasing 6.8% year over year. Quarterly operating income before restructuring costs and amortization came in at $299.2 million, down 10.5% year over year. Operating margin was 39.9% compared with 44.6% in the prior-year quarter.

Business Network Services Segment

Quarterly revenues grossed $112.8 million in fourth-quarter fiscal 2017, decreasing 0.1% year over year. Quarterly operating income before restructuring costs and amortization came in at $57.6 million, increasing 7.5% year over year. Operating margin was 51.1% compared with 50.8% in the prior-year quarter.

Wireless Service Segment

Quarterly revenues grossed $137.6 million in fourth-quarter fiscal 2017, increasing 16.2% year over year. Quarterly operating income before restructuring costs and amortization came in at $26.4 million, reflecting an increase of 13.8% year over year. Operating margin was 19.2% compared with 19.6% in the prior-year quarter.

Financial Outlook

Shaw Communications has given its full-year fiscal 2018 financial guidance. Operating income before restructuring costs and amortization is expected to be around C$2.1 billion and free cash flow is expected around C$375 million. Consolidated capital investment will be approximately C$1.38 billion.

Shaw Communications currently carries a Zacks Rank #5 (Strong Sell). The company operates in a highly competitive Canadian wireless market with incumbents like Rogers Communications Inc. (NYSE:RCI) , TELUS Corp. (NYSE:TU) and BCE Inc. (TO:BCE) . TELUS and BCE currently carry a Zacks Rank #3 (Hold) and 4, respectively, while Rogers Communications has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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