Why Is Shaw (SJR) Down 16% Since Last Earnings Report?

It has been about a month since the last earnings report for Shaw Communications (SJR). Shares have lost about 16% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Shaw due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Shaw Communications Q2 Earnings & Revenues Lag Estimates

Shaw Communications reported second-quarter fiscal 2022 adjusted earnings from continuing operations of 31 cents per share, missing the Zacks Consensus Estimate by 3.13%.

Total revenues came in at $1.069 billion, missing the consensus mark by 4.13%.

In domestic currency, Shaw reported earnings of C$0.39 per share, down 9.3% year over year. Total revenues increased 2% year over year to C$1.36 billion.

Segmental Update

Wireline revenues (76.5% of total revenues) dropped 1.3% on a year-over-year basis to C$1.04 billion. Wireline customers declined by roughly 58,081 in the reported quarter compared with a loss of nearly 66,030 in the year-ago quarter.

Wireline - Consumer revenues fell 2.4% to C$887 million. Wireline - Business revenues of C$153 million were up 5.5% year over year.

Wireless revenues (23.8% of total revenues) increased 3.9% on a year-over-year basis to C$323 million. Shaw added 41,189 new wireless customers in the reported quarter.

The Wireless division currently operates in Ontario, Alberta and British Columbia, covering roughly 50% of the Canadian population.

Wireless - Service revenues (73.7% of total segment revenues) were up 9.2% from the year-ago quarter’s figure to C$238 million.

ABPU fell 8.8% year over year to C$37.38. ARPU declined 1.06% from the year-ago quarter’s levels to C$36.43.

Wireless - Equipment revenues (26.3% of segment revenues) fell 28% year over year to C$85 million.

Operating Details

Operating, general and administrative expenses declined 3.06% year over year to C$727 million.

In second-quarter fiscal 2022, adjusted EBITDA rose 0.78% year over year to C$632 million. Adjusted EBITDA margin expanded 60 bps on a year-over-year basis to 46.5%.

Segment-wise, Wireline’s adjusted EBITDA dropped 5.7% to C$509 million. The Wireline segment’s adjusted EBITDA margin contracted 230 bps on a year-over-year basis to 48.9%.

Wireless adjusted EBITDA surged 26.8% to C$123 million. The Wireless segment’s adjusted EBITDA margin increased from 44.5% to 51.7%.

Cash Flow Details

As of Feb 28, 2022, Shaw Communications had cash and cash equivalents of $351 million. The company’s net debt position was C$5.598 billion.

Moreover, the company’s net debt leverage ratio was 2.2X, below management’s optimal range of 2.5X-3X.

In the quarter under review, capital expenditures were C$249 million compared with C$250 million in the year-ago quarter.

Free cash flow was C$217 million compared with C$248 million in the year-ago quarter.

 

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.

VGM Scores

At this time, Shaw has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Shaw has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.

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