Key Stock Changes On September 20, 2024

2 min read | September 20, 2024 08:36 AM EDT | By Team Kalkine Media

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Key Stock Changes On September 20, 2024 — Image source: Shutterstock

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Cogeco Communications Inc. (TSX:CCA) is experiencing a significant shift as the company’s three-year transformation program begins to materialize. This positive trajectory has led to an updated assessment from National Bank Financial, reflecting rising expectations for the upcoming release of fiscal 2025 guidance on October 31, along with an anticipated dividend increase. As part of the telecommunication sector, Cogeco's developments may signal broader trends and opportunities within the industry.

Organizational Restructuring and Future Savings

The recent restructuring outlined on May 29 aims to enhance revenue and cost efficiency. This initiative is expected to yield savings during fiscal 2025, with additional benefits projected in the subsequent two years, driven by investments in digitization and analytics. The initial impact of wireless ventures remains uncertain, particularly as EBITDA showed a slight decline of 1% and free cash flow decreased by 10% in fiscal 2024. However, there are expectations for improvements in fiscal 2025, necessitating positive actions from the new CEO. There are ongoing discussions regarding BEAD involvement, which could influence results more or less than anticipated, and an eventual strengthening of free cash flow is anticipated after a decline over the past three years, as network expansion initiatives progress.

Quarterly Projections and Financial Performance

For the upcoming quarter, projections indicate revenues of approximately $754.6 million, reflecting a year-over-year increase of 1.5%, surpassing consensus expectations of $750.4 million. Growth is expected in Cable Services across both Canadian and U.S. markets. Furthermore, earnings before interest, taxes, depreciation, and amortization (EBITDA) are estimated at $361.2 million, marking a 2.8% rise, also exceeding the market’s average expectation of $359.8 million. The forecast for fully diluted earnings per share stands at $1.82, representing a 6.5% decrease but still slightly outperforming peer estimates of $1.81.

Outlook and Market Adjustments

The fourth-quarter outlook, excluding foreign exchange effects, suggests stable revenues and low single-digit growth in EBITDA. Current foreign exchange rates have shown a 2.7% increase, contributing to higher-than-expected U.S. revenues and slightly improved EBITDA. Restructuring costs are anticipated to be lower than those recorded in the previous quarter. With a trend of decreasing capital expenditures, there is a possibility for free cash flow to exceed expectations. Additionally, there is speculation about achieving a profit beat following improvements in efficiency and corporate cost management.

After reevaluating the company’s valuation, the target for Cogeco Communications shares has been raised to $80, up from a previous target of $64. The average target among market analysts stands at approximately $71.15, according to LSEG data

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