Analysts Expect Strong Q2 Results from Shaw and Cocego Cable

Second quarter results from Cogeco Cable Inc. (CGEAF.PK) and Shaw Communications Inc. (SJR) will be released in the next 24 hours, with expectations for both summarized as stable by RBC Capital Markets analyst Jonathan Allen.

Mr. Allen said Cogeco, who will report after market close today, should report in-line revenue of C$260-million during the quarter, and slightly-below-consensus EBITDA of C$101.2-million and continuiing earnings per share of C$0.45.

The analyst told clients that Cogeco's Canadian operations have been on solid footing for several quarters and that he likes the fact the company will not be participating in the wireless spectrum auction.

That said, he noted that Cogeco's Portugal results continue to face aggressive price competition from incumbent cableco, TV Cabo.

In a note to clients he wrote:

While pressure may abate this quarter, we note that TV Cabo prices remained at a discount versus Cogeco for much of the quarter. Consequently, Cogeco shares may be inexpensive versus peers, but until Portugal improves we remain cautious relative to its peers.

Mr. Allen continues to rate Cogeco shares "outperform" with a C$60 price target.

Shaw, meanwhile, is expected to report results modestly above consensus on Friday before market open. Mr. Allen predicts revenues of C$766-million, EBITDA of C$352-million and EPS of C$0.26. He maintained his "outperform" rating on the stock, and left his C$30 price target unchanged.

The analyst said Shaw enjoys a favorable operating environment in Alberta and B.C., and he expects it will continue to win share and implement pricing increases on select services in 2008.

Regarding Shaw's participation in the wireless spectrum, Mr. Allen wrote that while it could run a wireless division successfully, he doesn't believe doing so is a strategic necessity.

He told clients that:

The cash outlay and years of operating losses Shaw would incur in the early years developing a wireless business represents the biggest source of risk to Shaw's free cash flow growth profile.

He added that the company has said it is not necessarily committed to building out a network and may be involved instead for the option value presented by the spectrum.