Shaw (TSX:SJR.B) Reports 30% YoY Profit Jump in Q2: Worth A Buy?

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Summary

  • Canadian telecom company Shaw Communications Inc (TSX:SJR.B) posted higher top line and profits for the second fiscal quarter of 2021 on Wednesday.
  • Its top line was driven by higher revenue from wireless operations and 82,300 new subscribers in the quarter.
  • The Calgary-based telecom firm’s current share price is C$ 33.91, which is 16.27 per cent down compared with Rogers’ offer price of C$ 40.50 per common share.

Canadian telecom company Shaw Communications Inc (TSX:SJR.B) posted higher top line and profits for the second fiscal quarter of 2021 on Wednesday, April 14.

The telecom stock, however, is trading below what Rogers Communications Inc (TSX: RCI.B) offered in its C$ 26-billion takeover transaction and investors should position themselves accordingly.

Shaw reported that its net income amounted to US$ 217 million in Q2 FY21, a massive 30 per cent year-over-year (YoY) rise against C$ 167 million in Q2 FY20. It also recorded a quarterly revenue of C$ 1.387 billion, up against a revenue of $1.363 billion in Q2 FY20. The top line was driven by higher revenue from wireless operations and 82,300 new subscribers in the quarter.  

Shaw communications’ earnings before interest, taxes, depreciation, and amortization (EBITDA) was C$ 637 million in the quarter, surpassing analyst estimates of C$ 612 million, as per Refinitiv data.

Let us check out the telecom stock’s price performance and outlook:

Shaw Communications Inc (TSX:SJR.B)


The wireless stock touched its all-time high of C$ 35.08 per piece on March 16, 2020, following the acquisition deal announcement from Rogers, which is awaiting federal and regulatory approvals. The Calgary-based telecom firm’s current share price is C$ 33.91, which is 16.27 per cent down compared with Rogers’ offer price of C$ 40.50 per common share.

Shaw's One-Year Stock Performance Chart. (Source: Refinitiv)

Shaw’s stock is up 51.79 per cent year-to-date (YTD), offsetting previous year’s losses and returning 49.31 per cent of growth in one year. In terms of valuation, the stock this year outperformed the S&P/TSX 300 Composite, which has increased by 38.03 per cent in comparison.

Earlier, Shaw's Freedom Mobile announced that it will not take part in a 5G wireless spectrum auction in June. This development took some Bay Street-based telecom analysts by surprise as the Rogers-Shaw deal is yet to clear regulatory scrutiny. 

The fourth largest Canadian telecom company’s CEO, Brad Shaw, stated that the joint Rogers-Shaw entity will improve their services to help connect rural, Indigenous and remote communities through their advanced technology. 

Image Source: Kalkine Group @2020

 

Shaw Communications’ Outlook For Fiscal 2021


Shaw Communications said that it expects to meet its fiscal 2021 target of adjusted EBITDA against the previous fiscal year. It anticipates consolidated capital investments of nearly C$ 1 billion, along with a free cash flow of almost C$ 800 million.

However, its stock performance will largely depend on securities scrutiny and the pending approval of the Rogers-Shaw deal

 

The above constitutes a preliminary view and any interest in stocks should be evaluated further from investment point of view.

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