Cogeco Sees Solid Revenue Growth But Misses Profits; Apartment Shares

Cogeco Communications (EAST: ACC) recently reported earnings for its third quarter of fiscal 2022, and earnings per share came in at C$2.16, which was below analysts’ consensus estimate of C$2.29. In the past nine quarters, the company has only missed estimates three times.

Additionally, sales were up 16.6% year-over-year, with revenue reaching C$728.1 million from C$624.3 million. The increase in revenues is mainly attributable to growth in the United States.

More importantly, EBITDA increased by 17%, meaning the company saw its operating leverage as it increased more than revenue. Indeed, the EBITDA margin fell from 47.6% to 47.7%.

However, the company’s earnings only increased by 7.5% compared to the comparable period, and free cash flow decreased by more than 20% to C$104.8 million due to the increase in capital expenditures.

In terms of guidance for fiscal 2023, Cogeco expects revenue growth of 2% to 4% and adjusted EBITDA growth of 1.5% to 3.5%, but free cash flow is expected to decrease by 2% to 12% due to increased growth spending. The stock is currently stable the day after the news was released.

Insider activity reflects low trust

Looking at the insider activity, there doesn’t seem to be much excitement. In fact, insiders have been selling over the past three months. As a result, insider confidence appears to be weak as the insider confidence signal for CCA stock is negative and below the industry average, as seen in the following image:

Analyst recommendations on the Cogeco share

Cogeco has a Moderate Buy consensus rating based on three Buys and three Holds awarded over the past three months. The average CCA price target of C$116.91 implies an upside potential of 34.2%.

Final Thoughts – Mixed Quarter, Mixed Investor Sentiment

Cogeco had a mixed quarter as revenue grew strongly while earnings were worse than expected. Additionally, it should be noted that while analysts have a favorable view of the stock, insiders do not at this time.

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