BUY NOW: Why this Telecom title could generate a solid return in 2020


Shaw Communications (TSX: SJR.B) (NYSE: SJR) – the Canadian telecommunications firm – announced its better than expected third quarter results on Friday.During the quarter ended May 2020, the company’s adjusted profit fell approximately 47% year-over-year (year-over-year) to $ 0.35 per share. Nonetheless, it was better than Bay Street analysts’ expectations of $ 0.30 per share. This sparked optimism among investors and triggered a rally in its stocks.

Friday, its title stabilized with gains of 2.1% for the day and continues to extend these gains today, since it increased by 5.3% this morning. Let’s take a closer look at some highlights from Shaw Communications’ third quarter results and see why it might be a good time to buy these stocks from the TSX.

Shaw Communications third quarter 2020 results

In the three months ended May 2020, the company’s total revenue fell slightly 0.9% year-over-year to $ 1.3 billion. But it was almost 4.1% higher than analysts’ estimates. Due to the ongoing pandemic, subscriber activity at Shaw Communications remained moderate.

On the positive side, it recorded a strong 72% increase in the number of self-installing customers. Many of its customers seem to choose to install their wired Internet services themselves to track social isolation amid the COVID-19 epidemic.

Shaw Communications’ wireless revenues increased 17% year-over-year in the third quarter to $ 206 million. This increase can be attributed to the increase in its wireline subscriber base and the high demand for Big Gig data plans as more people continue to work from home.

Is profitability improving?

In the third quarter of fiscal 2020, Shaw Communications’ adjusted net profit margin was 14% – much better than 12.3% and 11.7% in the second and first quarter, respectively. In fiscal 2019, the company’s adjusted net profit margin was also slightly less than 13.8%.

It is important to note that Shaw Communications’ profit margins in its service segment tend to be higher compared to equipment sales. Equipment sales decreased in the third quarter, while service revenues increased, which helped the company improve its bottom line.

Plans To Benefit From Home Work Culture

Interestingly, Shaw Communications recently launched its Fiber + Gig Internet service, which is currently available to more than 99% of its residential customers. The new service primarily targets consumers who need faster Internet speeds to work from home or take their courses online.

Although company management recognizes the uncertainties of the pandemic, it strives to capitalize on the work of family culture. Shaw Communications CEO Brad Shaw says the company is “well positioned to take advantage of growth opportunities in a post-COVID environment”.

Stupid takeout

Clearly, Shaw Communications’ growing revenues from wireless services are helping it improve its margins, despite the headwinds of the COVID-19 epidemic. As the economy gradually reopens, the company’s earnings from the industry are likely to get back on track.

I believe that many new residential subscribers – who have taken advantage of Shaw’s Internet services to work from home – may choose to continue their subscriptions, even after the economy has fully reopened in the coming months. This would help Shaw Communications to expand its subscriber base of residential consumers, as well as continued growth in the business sector as the pandemic subsides.

As of July 10, its shares were trading with a loss of 14.8% since the start of the year, compared to a drop of 7.9%. S & P / TSX Composite Index. In my opinion, many investors are unaware of the improved profit margins of Shaw Communications and its potential for future growth in the post-pandemic world. These are some of the main reasons why you may want to buy Shaw Communications stocks now.

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