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Cogeco Communications (TSE:CCA)
TSX:CCA

Cogeco Communications (CCA) AI Stock Analysis

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Cogeco Communications

(TSX:CCA)

Rating:72Outperform
Price Target:
C$82.00
▲(12.58%Upside)
Cogeco Communications' strong financial performance and attractive valuation are key strengths, supported by robust cash flow and a high dividend yield. However, technical indicators suggest the stock may be overbought, and challenges such as revenue declines and decreased earnings per share from the earnings call highlight areas for improvement. The company's transformation initiatives and dividend increase provide a positive outlook, but strategic efforts are needed to address current challenges.
Positive Factors
Canadian Wireless Launch
The Canadian wireless launch seems imminent as customers are now able to pre-register for the service.
Future Free Cash Flow
Cogeco Communications is considered one of the best smidcap ideas due to much higher free cash flow expected in the future and unlocking value through asset sales.
Revenue and EBITDA Performance
Q2 revenue was slightly ahead of expectations while EBITDA beat, largely reflecting FX translation benefits.
Negative Factors
EBITDA Growth
EBITDA growth is expected to slow in Q2.
Seismic Issues
Estimates and target for Cogeco Communications have been lowered to reflect seismic issues.
Subscriber Metrics
Subscriber metrics were slightly below expectations.

Cogeco Communications (CCA) vs. iShares MSCI Canada ETF (EWC)

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 Earnings Call Summary

Earnings Call Date:Apr 09, 2025
(Q2-2025)
|
% Change Since: 11.42%|
Next Earnings Date:Jul 15, 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.
Q2-2025 Updates
Positive Updates
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.
Negative Updates
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 Financial Statement Overview

Summary
Cogeco Communications maintains strong profitability and efficient cash flow management, with robust EBITDA margins and cash flow generation. The company faces moderate leverage but has a sound financial structure. However, a slight decline in revenue and free cash flow growth rates suggests a need for strategic focus on capturing market share and managing capital expenditures effectively.
Income Statement
78
Positive
Cogeco Communications demonstrates consistent revenue generation with a slight decrease in TTM revenue compared to the previous year. The gross profit margin remains robust at 69.6% TTM, indicating strong cost management. However, the net profit margin decreased slightly to 11.0% TTM from 11.3%, which might suggest rising costs or competitive pressures. The EBITDA margin improved to 48.6% TTM, reflecting efficient operations. Despite stable EBIT margins, the slight decline in revenue growth indicates a need for strategic focus on capturing market share.
Balance Sheet
72
Positive
The company's balance sheet shows a solid equity position with an equity ratio of 31.3% TTM, indicating a healthy financial structure. The debt-to-equity ratio of 1.59 TTM suggests moderate leverage, which is typical for the telecommunications industry. Return on Equity (ROE) stands at 10.3% TTM, reflecting a reasonable return for shareholders. However, the high level of total debt remains a potential risk factor, underscoring the importance of maintaining strong cash flows to service debt obligations.
Cash Flow
81
Very Positive
Cogeco Communications has shown a strong operating cash flow of $1.12 billion TTM, highlighting robust cash generation capabilities. The free cash flow to net income ratio is 1.47 TTM, indicating efficient conversion of earnings into cash. However, a slight decline in free cash flow growth rate might signal challenges in capital expenditure management. Overall, the company maintains a strong cash flow position to support its financial obligations and potential investments.
BreakdownTTMSep 2024Sep 2023Sep 2022Sep 2021Sep 2020
Income Statement
Total Revenue2.97B2.98B2.98B2.90B2.51B2.38B
Gross Profit1.54B2.49B932.42M2.11B1.63B1.55B
EBITDA1.44B1.36B1.39B1.36B1.20B1.17B
Net Income327.62M335.53M392.27M423.30M401.52M375.17M
Balance Sheet
Total Assets10.15B9.68B9.77B9.28B7.35B6.80B
Cash, Cash Equivalents and Short-Term Investments136.02M76.33M362.92M370.90M365.52M366.50M
Total Debt5.06B4.82B5.04B4.68B3.28B3.12B
Total Liabilities6.43B6.20B6.33B6.09B4.55B4.16B
Stockholders Equity3.18B2.98B2.96B2.75B2.42B2.27B
Cash Flow
Free Cash Flow480.40M516.13M100.08M259.55M426.86M433.83M
Operating Cash Flow1.12B1.18B962.90M1.24B1.02B917.82M
Investing Cash Flow-786.03M-916.61M-954.47M-2.41B-984.83M-557.27M
Financing Cash Flow-282.49M-542.37M-23.77M981.92M-27.41M-547.10M

Cogeco Communications Technical Analysis

Technical Analysis Sentiment
Positive
Last Price72.84
Price Trends
50DMA
68.20
Positive
100DMA
66.79
Positive
200DMA
66.31
Positive
Market Momentum
MACD
1.08
Negative
RSI
71.93
Negative
STOCH
90.53
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 72.84 is above the 20-day moving average (MA) of 69.04, above the 50-day MA of 68.20, and above the 200-day MA of 66.31, indicating a bullish trend. The MACD of 1.08 indicates Negative momentum. The RSI at 71.93 is Negative, neither overbought nor oversold. The STOCH value of 90.53 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 (61)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
TSCCA
72
Outperform
$3.08B9.3610.84%6.94%0.21%-6.81%
61
Neutral
$41.26B-0.79-14.19%3.78%2.39%-73.52%
BCBCE
$20.88B83.212.83%5.56%
RCRCI
$17.63B13.5416.65%4.49%
TUTU
$24.68B28.707.51%7.33%
TSCGO
66
Neutral
C$664.00M7.6010.38%7.36%0.06%115.11%
$7.04B12.9337.69%3.33%
* Communication Services Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
TSE:CCA
Cogeco Communications
72.84
23.37
47.23%
BCE
BCE
22.85
-6.09
-21.04%
RCI
Rogers Communication
32.07
-3.09
-8.79%
TU
Telus
16.30
1.95
13.59%
TSE:CGO
Cogeco Inc. SV
68.86
22.97
50.05%
QBCRF
Quebecor
30.63
10.55
52.54%

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.

Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

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.Date of analysis: Jul 03, 2025