July 8, 2010 / 12:58 PM / 7 years ago

UPDATE 2-Cogeco's 2011 growth view lags estimates

* Cogeco Q3 EPS C$0.64 vs est C$0.60, rev up 5 pct

* Cable arm sees 2011 rev of C$1.34 bln, profit C$120 mln

* Estimates were 2011 rev of C$1.37 bln, profit C$129 mln

* Heavily-traded Cogeco Cable stock falls 1.6 pct (Recasts, adds comments from conference call, analyst comments, stock prices)

By Susan Taylor

OTTAWA, July 8 (Reuters) - Cogeco Inc CGO.TO and its Cogeco Cable CCA.TO subsidiary on Thursday posted quarterly results that largely matched estimates but the media and telecoms company forecast 2011 growth that lagged.

Analysts said the Montreal-based company presented a promising subscriber-growth estimate, but the weak financial forecast offset that good news.

Shares of the more heavily traded Cogeco Cable fell nearly 2 percent on the TSX on Thursday, while Cogeco Inc stock rose 4 percent.

Cogeco expects revenue of C$1.34 billion and net income of C$120 million in 2011, describing those estimates as conservative. Even so, the forecasts fall short of what analysts expected, according to Thomson Reuters I/B/E/S.

Cogeco expects to add more than 250,000 subscribers in 2011, well above a consensus expectation for 170,000.

“The guidance suggests that growth is once again expected from Portugal,” National Bank Financial analyst Greg MacDonald said in a note. “Importantly, Canada continues to demonstrate positive subscriber trends.”

MacDonald said quarterly subscriber growth for basic cable, digital cable, high-speed Internet and Portuguese operations all beat his estimates. Only Internet phone subscriber growth trailed his view.

The company added more than 27,680 subscribers in Portugal, far ahead of MacDonald’s expectation of more than 10,880.

THIRD-QUARTER MIXED BAG

As the Canadian market matures, growth in the core cable business is slowing to a high-single digit percentage rate from the mid-teens previously, said Desjardins Securities analyst Maher Yaghi.

Recent subscriber growth and stable pricing in Portugal is not yet reflected in the financial results, he said, and may not appear until the euro recovers.

Cogeco Inc said third-quarter earnings were little changed at C$10.7 million ($10.22 million), or 64 Canadian cents a share, for the period ended May 31. Revenue rose 4.6 percent to C$330.9 million.

Analysts on average had expected a profit of 60 Canadian cents a share, on revenue of C$331.4 million.

The company’s cable arm, which operates in Canada and Portugal, posted profit of C$31.2 million, or 64 Canadian cents a share, down from C$32.5 million, or 67 Canadian cents, a year earlier.

Revenue rose 4.5 percent to C$319.3 million.

The cable business was expected to post a profit of 57 Canadian cents a share on revenue of C$322.1 million.

In Portugal, its Cabovisao competes with state-owned Portugal Telecom and ZON Multimedia ZON.LS. Pricing wars there have squeezed profit margins.

Portugal’s cable market continues to be “extremely competitive” but is stabilizing, Chief Executive Louis Audet said on a conference call.

Cogeco, which is about 23 percent owned by rival Rogers Communications Inc RCIb.TO, said in April it was ready to look at “reasonably priced, reasonably sized” acquisitions in Europe. Since then, shares have fallen by about 12 percent on the Toronto Stock Exchange.

The company said there was little chance of such a deal in the near term.

“The financial market is in very very bad shape in Europe and the M&A activity is essentially dead. So there’s nothing happening right now,” Audet said.

Cogeco recently acquired 11 radio stations in Quebec for C$80 million from Corus Entertainment CJRb.TO, adding to the five stations it operates in that market.

Shares of Cogeco Cable shed 53 Canadian cents to C$34.22 on the Toronto Stock Exchange on Thursday as Cogeco Inc stock rose C$1.21 to C$31.25. ($1=$1.04 Canadian) (With additional reporting by Bhaswati Mukhopadhyay in Bangalore; Editing by Frank McGurty)

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