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Cogeco Communications (TSE:CCA)
TSX:CCA

Cogeco Communications (CCA) AI Stock Analysis

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Cogeco Communications

(TSX:CCA)

75Outperform
Cogeco Communications presents a balanced investment opportunity. The company's strong financial position, attractive valuation, and strategic transformation initiatives are major strengths. However, ongoing revenue challenges and mixed technical indicators warrant a cautious approach. Overall, the stock has potential for growth but is tempered by market uncertainties.
Positive Factors
Company Strategy
Operations appear to be on the right track with a focus on synergies, digitization/analytics, network expansion, and wireless.
Earnings
Q2 revenue was slightly ahead of expectations while EBITDA beat, largely reflecting FX translation benefits.
Market Position
The Canadian wireless launch seems imminent as customers are now able to pre-register for the service.
Negative Factors
Revenue Trends
Management highlighted ARPU pressure in Canada, likely to push revenue trends into low single-digit decline territory.
Subscriber Metrics
Subscriber metrics were slightly below expectations.

Cogeco Communications (CCA) vs. S&P 500 (SPY)

Cogeco Communications Business Overview & Revenue Model

Company DescriptionCogeco Communications Inc. operates as a communications corporation in North America. It operates in two segments, Canadian Broadband Services and American Broadband Services. The company offers Internet, video, and telephony services to residential and business customers through its two-way broadband fiber networks. It provides Internet services using modems, Wi-Fi gateways, and extenders either on a rental basis or as part of the Internet service package; video services on a subscription basis; home phone services using Internet protocol (IP); local and long-distance calling services; broadband Internet services; and IP based telephony services and other network connectivity services delivered over fiber optic connection to larger businesses. The company serves the primary service units, Internet, video, and telephony service customers. It offers cable operator services under the Cogeco Connexion name in Québec and Ontario, and in the United States under the Atlantic Broadband brand. The company was formerly known as Cogeco Cable Inc. and changed its name to Cogeco Communications Inc. in January 2016. Cogeco Communications Inc. was founded in 1972 and is headquartered in Montreal, Canada. Cogeco Communications Inc. operates as a subsidiary of Cogeco Inc.
How the Company Makes MoneyCogeco Communications generates revenue through a diverse set of channels, primarily driven by its provision of cable television, internet, and telephony services. The company's core revenue streams include subscription fees from residential customers for cable TV packages, high-speed internet plans, and telephony services. Additionally, Cogeco Communications earns revenue from its business services segment, which offers telecommunications services such as internet connectivity, cloud solutions, and managed IT services to commercial clients. The company also benefits from strategic partnerships and investments in network infrastructure, which enhance service offerings and customer reach. These factors collectively contribute to Cogeco Communications' financial performance and market position.

Cogeco Communications Financial Statement Overview

Summary
Cogeco Communications displays a solid financial foundation with strong cash flow generation and operational efficiency. The company has a stable income statement with decent profitability, although revenue growth has been flat. The balance sheet shows moderate leverage, and cash flow is robust, indicating efficient cash management.
Income Statement
75
Positive
Cogeco Communications has demonstrated a stable financial performance. The TTM Gross Profit Margin is strong at approximately 65.5%, indicating efficient cost management. The Net Profit Margin is moderate at 11.7%, suggesting a decent level of profitability. Revenue growth has been relatively stagnant, with a slight decline observed in recent periods. The EBIT and EBITDA margins are robust at 24.9% and 48.4%, respectively, showcasing strong operational efficiency.
Balance Sheet
70
Positive
The Balance Sheet reflects a solid equity position with a Debt-to-Equity ratio of approximately 1.59, indicating moderate leverage. The Return on Equity (ROE) stands at 11.2%, reflecting moderate profitability for equity holders. The Equity Ratio is 31.3%, highlighting a balanced capital structure, though there is room for improvement in reducing leverage.
Cash Flow
80
Positive
The Cash Flow statement is strong, with a solid Operating Cash Flow to Net Income ratio of 3.34, indicating efficient cash generation relative to net income. The Free Cash Flow to Net Income ratio is 1.32, showing good cash flow after capital expenditures. The Free Cash Flow Growth Rate is healthy at 80.7% over the past year, indicating strong cash flow growth.
Breakdown
TTMSep 2024Sep 2023Sep 2022Sep 2021Sep 2020
Income StatementTotal Revenue
2.97B2.98B2.98B2.90B2.51B2.38B
Gross Profit
1.94B2.49B932.42M2.11B1.63B1.55B
EBIT
738.76M768.76M810.04M770.32M697.37M653.54M
EBITDA
1.44B1.36B1.39B1.36B1.20B1.17B
Net Income Common Stockholders
346.63M335.53M392.27M423.30M401.52M375.17M
Balance SheetCash, Cash Equivalents and Short-Term Investments
11.61M76.33M362.92M370.90M365.52M366.50M
Total Assets
2.62B9.68B9.77B9.28B7.35B6.80B
Total Debt
1.05B4.82B5.04B4.68B3.28B3.12B
Net Debt
1.04B4.75B4.68B4.31B2.91B2.76B
Total Liabilities
1.54B6.20B6.33B6.09B4.55B4.16B
Stockholders Equity
1.08B2.98B2.96B2.75B2.42B2.27B
Cash FlowFree Cash Flow
456.74M516.13M100.08M259.55M426.86M433.83M
Operating Cash Flow
1.16B1.18B962.90M1.24B1.02B917.82M
Investing Cash Flow
-900.46M-916.61M-954.47M-2.41B-984.83M-557.27M
Financing Cash Flow
-250.06M-542.37M-23.77M981.92M-27.41M-547.10M

Cogeco Communications Technical Analysis

Technical Analysis Sentiment
Positive
Last Price66.20
Price Trends
50DMA
66.25
Negative
100DMA
65.89
Positive
200DMA
65.09
Positive
Market Momentum
MACD
-0.35
Positive
RSI
50.32
Neutral
STOCH
81.61
Negative
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSE:CCA, the sentiment is Positive. The current price of 66.2 is below the 20-day moving average (MA) of 66.66, below the 50-day MA of 66.25, and above the 200-day MA of 65.09, indicating a neutral trend. The MACD of -0.35 indicates Positive momentum. The RSI at 50.32 is Neutral, neither overbought nor oversold. The STOCH value of 81.61 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for TSE:CCA.

Cogeco Communications Peers Comparison

Overall Rating
UnderperformOutperform
Sector (58)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
TSCCA
75
Outperform
$2.64B8.0310.84%5.37%0.21%-6.81%
58
Neutral
$13.14B6.83-2.45%3.85%2.36%-36.75%
* Communication Services Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
TSE:CCA
Cogeco Communications
64.37
12.61
24.36%
BCE
BCE
22.22
-7.72
-25.78%
RCI
Rogers Communication
25.08
-11.55
-31.53%
TU
Telus
15.10
0.11
0.73%
QBCRF
Quebecor
26.08
5.96
29.62%

Cogeco Communications Earnings Call Summary

Earnings Call Date: Apr 9, 2025 | % Change Since: 1.26% | Next Earnings Date: Jul 10, 2025
Earnings Call Sentiment Neutral
The earnings call highlighted the positive impact of transformation initiatives and subscriber growth in Canada, along with a plan for future free cash flow growth. However, revenue declines in both Canada and the US, challenges in the radio advertising market, and a decrease in earnings per share indicate ongoing challenges.
Highlights
Free Cash Flow Growth Plan
Cogeco plans to materially grow free cash flow over the next two years, enabled by the end of a CapEx investment cycle and low dividend payout ratios providing room for continued dividend growth.
Transformation Program Ahead of Expectations
The transformation efforts have contributed to the expansion of consolidated EBITDA margins, with strong Internet subscriber metrics in Canada and year-over-year improvements in customer satisfaction in the US.
Canadian Subscriber Growth
Cogeco Connection grew its internet customer base by 8,300 subscribers this quarter, with higher customer penetration levels than target in completed regions of Quebec and Ontario.
Increase in Free Cash Flow
Free cash flow in constant currency increased by 12.8%, largely due to lower capital expenditures and financial expenses.
Lowlights
Revenue Decline in Canada and US
Cogeco Connections revenue declined by 0.9% in Canada due to fewer video and wireline phone service subscribers. Breezeline's revenue declined by 4.5% in constant currency due to subscriber base decline.
Challenges in Radio Advertising Market
Cogeco Media faced ongoing challenges in the radio advertising market, contributing to a decrease in revenue, despite positive contributions from digital advertising solutions.
Decrease in Earnings Per Share
Diluted earnings per share declined by 20% in reported currency due to higher D&A expenses, acquisition integration and restructuring expenses, and taxes.
Company Guidance
During the Q2 2025 earnings conference call, Cogeco Inc. and Cogeco Communications Inc. provided guidance on their financial and operational outlook. The company expects a material growth in free cash flow over the next two years, driven by the completion of a CapEx investment cycle in rural network builds and network modernization. They reported a decline in consolidated revenue by 2.7%, with a stable EBITDA in constant currency due to operating efficiencies. The net debt-to-adjusted EBITDA ratio held steady at 3.4 turns, and a quarterly dividend of $0.922 per share was declared. For fiscal year 2025, Cogeco Communications is maintaining their annual guidance, anticipating a decrease in consolidated revenue and adjusted EBITDA in the low single digits for Q3. Capital intensity is expected to be approximately 350 basis points higher than Q3 of the previous year. The company's transformation program aims to enhance performance through Canada-US synergies, digitization, advanced analytics, and network expansions, contributing to an expansion of consolidated EBITDA margins.

Cogeco Communications Corporate Events

DividendsBusiness Operations and StrategyFinancial Disclosures
Cogeco Communications Reports Q2 Fiscal 2025 Results, Highlights Transformation Progress
Positive
Apr 9, 2025

Cogeco Communications reported its financial results for the second quarter of fiscal 2025, highlighting a modest revenue increase and improved customer satisfaction in both Canada and the U.S. The company is progressing with its three-year transformation program, which aims to boost agility and competitiveness, and is on track with its Canadian wireless launch preparations. Despite facing revenue challenges, Cogeco achieved a 2.7% increase in adjusted EBITDA through cost reductions and operational efficiencies. The company declared a quarterly dividend increase of 8.0%, reflecting its commitment to returning value to shareholders.

Spark’s Take on TSE:CCA Stock

According to Spark, TipRanks’ AI Analyst, TSE:CCA is a Outperform.

Cogeco Communications is well-positioned financially with strong cash flow and operational efficiency. The stock’s technical indicators are favorable, and its valuation metrics suggest it is undervalued. However, the mixed outlook from the earnings call, particularly regarding anticipated revenue and EBITDA declines, warrants caution. Overall, the stock presents a balanced opportunity with potential for growth, tempered by market challenges.

To see Spark’s full report on TSE:CCA stock, click here.

Private Placements and Financing
Cogeco Communications Unveils $325 Million Notes Offering
Neutral
Feb 5, 2025

Cogeco Communications Inc. has announced a private offering of $325 million in senior secured notes due in 2035, with an interest rate of 4.743%. The proceeds from this offering will be used to repay existing debt and for general corporate purposes, aiming to maintain the company’s financial flexibility. The notes are rated ‘BBB (low)’ by DBRS Limited with a stable outlook and are expected to be rated ‘BBB-‘ by Standard & Poor’s. This move reflects Cogeco’s strategic financial management and positions it to further solidify its market presence.

Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.