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1. Company Snapshot

1.a. Company Description

Cogeco Inc., through its subsidiaries, operates in the communications and media sectors in Canada and the United States.The company operates in two segments, Communications and Other.The Communications segment provides a range of Internet, video, and telephony services through its two-way broadband fiber networks primarily to residential customers, as well as to small and medium sized businesses under the Cogeco Connexion name in Quebec and Ontario; and Atlantic Broadband brand in the United States.


The Other segment owns and operates 23 radio stations with complementary radio formats and coverage serving a range of audiences primarily across the province of Québec; and Cogeco News, a news agency.It serves primary service units, Internet, video, and telephony service customers.The company was incorporated in 1957 and is headquartered in Montreal, Canada.

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1.b. Last Insights on CGO

Cogeco Inc.'s recent performance was negatively driven by a 1.4% decline in revenue to CA$765.0m in Q1 2025, compared to the same period last year. Despite a 40% increase in EPS to CA$3.13, the revenue decline and lower-than-expected growth led to a price target reduction by CIBC Capital Markets to $64 from $67. This suggests that investors are concerned about the company's ability to sustain its growth momentum, potentially due to increased competition in the telecommunications market."

1.c. Company Highlights

2. Cogeco's Q1 2026 Earnings: A Turnaround Story Unfolds

Cogeco Inc. and Cogeco Communications Inc. reported their Q1 2026 earnings, with consolidated revenue declining by 4.9% in constant currency to an undisclosed figure, and adjusted EBITDA down 3.7%. Despite the decline, the company's diluted earnings per share (EPS) came in at $3, beating analyst estimates of $2.05. The decline in EPS was mainly due to a one-time gain recorded in the prior year, which resulted in a 12.2% drop. The net debt to EBITDA ratio stood at 3.2 turns at the end of the quarter, slightly below the reported 3.26 figure.

Publication Date: Jan -16

📋 Highlights
  • U.S. Turnaround Progress:: 2,600 Internet subscriber additions in Ohio, strongest quarterly performance since acquisition four years ago.
  • Financial Declines:: Revenue down 4.9% (constant currency), adjusted EBITDA down 3.7%, and diluted EPS fell 12.2% due to prior-year one-time gain.
  • Dividend Increase:: Quarterly dividend rose 7% to $0.987/share, reflecting confidence in capital structure despite net debt/EBITDA at 3.2x.
  • Canadian Broadband Margins:: 15% reduction in customer complaints and 8.1% year-on-year revenue growth in Media driven by digital advertising.
  • U.S. Strategic Focus:: Shift to fill existing infrastructure, with simplified pricing and analytics improving net adds; no new footprint expansion planned.

Segment Performance

The company's U.S. business is showing signs of turnaround, with improved subscriber trends for the second consecutive quarter. Cogeco added 2,600 Internet subscribers in Ohio, its best quarter since acquiring the business four years ago. In Canada, performance remains solid, with positive year-on-year EBITDA trends and a 15% reduction in customer complaints. The Canadian broadband margins have been increasing, with a good margin performance in Q1.

Guidance and Outlook

For Q2, the company expects consolidated revenue and EBITDA in constant currency to decline in the low to mid-single digits compared to last year. However, the U.S. business is expected to improve in the second half of the year, driven by customer trends and cost and revenue initiatives. The company aims to grow its customer base across its entire U.S. operation on a repeatable basis.

Valuation and Dividend

The company declared a quarterly dividend of $0.987 per share, up 7% year-on-year, with a dividend yield of 5.45%. The stock trades at a P/E Ratio of 7.7, EV/EBITDA of 3.72, and a P/S Ratio of 0.22. Analysts estimate next year's revenue growth at -1.7%. The dividend yield is higher than the cost of debt, making share buybacks beneficial. With a ROIC of 6.28% and ROE of 9.92%, the company's profitability metrics indicate a stable performance.

Strategic Initiatives

The company plans to launch a second brand in the U.S. to tackle different market segments and is leveraging AI to improve operations and revenue generation. In Ohio, the company has improved net adds through new sales channels, simplified pricing, and analytics, a playbook that can be applied to other U.S. regions. The competitive environment is steady with some fluctuations, and fiber penetration in the U.S. is approaching a stability point similar to what was experienced in Canada.

3. NewsRoom

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Cogeco Communications (TSX:CCA) Is Down 5.2% After Major Shareholder Trims Stake And Q1 Earnings Decline - Has The Bull Case Changed?

Jan -28

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Cogeco shares fall 6% as Quebec's Caisse trims stake in $229-million share sale

Jan -27

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CIBC Raises Cogeco Communications' Price Target to C$71 from C$68

Jan -16

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COGECO INC. ANNOUNCES VOTING RESULTS ON THE ELECTION OF DIRECTORS HELD DURING ITS ANNUAL SHAREHOLDERS' MEETING

Jan -16

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Cogeco Inc (CGECF) Q1 2026 Earnings Call Highlights: Navigating Challenges with Strategic Growth

Jan -15

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Cogeco Q1 Earnings Call Highlights

Jan -15

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Cogeco announces its Q1 2026 financial results

Jan -15

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Cogeco and Cogeco Communications Schedule the Release of Their Financial Results for the First Quarter of Fiscal 2026 and Related Conference Call

Dec -16

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4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (5.99%)

6. Segments

American Broadband Services

Expected Growth: 4.65%

American Broadband Services from Cogeco Inc. achieves 4.65% growth driven by increasing demand for high-speed internet, expansion into underserved rural areas, and strategic investments in network infrastructure. Additionally, the segment benefits from a growing customer base, competitive pricing, and a focus on delivering exceptional customer experience.

Canadian Broadband Services

Expected Growth: 7.4%

Cogeco's Canadian Broadband Services growth of 7.4% is driven by increasing demand for high-speed internet, bundling strategies, and investments in network infrastructure. Additionally, rural area expansions, competitive pricing, and customer retention efforts contribute to the growth. Furthermore, the shift towards online streaming and remote work accelerates broadband adoption, supporting the segment's expansion.

Other

Expected Growth: 4.83%

Cogeco Inc.'s 4.83% growth in 'Other' segment is driven by increasing demand for its business services, expansion into new markets, and strategic acquisitions. Additionally, the company's focus on digital transformation, cost savings initiatives, and investments in network infrastructure have contributed to this growth.

7. Detailed Products

Internet Services

Cogeco offers a range of internet services, including high-speed internet, Wi-Fi, and fibre-optic connections, providing fast and reliable connectivity for residential and business customers.

Television Services

Cogeco provides a variety of television services, including digital TV, HD TV, and on-demand content, offering a range of channels and programming options for residential customers.

Phone Services

Cogeco offers home phone services, including local and long-distance calling, voicemail, and call features, providing reliable and affordable communication solutions for residential customers.

Fibre-Optic Network Services

Cogeco provides fibre-optic network services, including dedicated internet, Ethernet, and wavelength services, offering high-speed and reliable connectivity for business customers.

Data Centre Services

Cogeco offers data centre services, including colocation, cloud, and managed services, providing secure and reliable infrastructure for business customers.

IT Services

Cogeco provides IT services, including managed IT, cybersecurity, and cloud services, offering comprehensive technology solutions for business customers.

8. Cogeco Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for Cogeco Inc. is medium due to the availability of alternative telecommunications services from competitors.

Bargaining Power Of Customers

The bargaining power of customers is low due to the lack of negotiating power and the high switching costs associated with changing telecommunications providers.

Bargaining Power Of Suppliers

The bargaining power of suppliers is medium due to the presence of multiple suppliers of network equipment and services, but the high costs associated with switching suppliers.

Threat Of New Entrants

The threat of new entrants is low due to the high barriers to entry, including the need for significant capital investments and regulatory approvals.

Intensity Of Rivalry

The intensity of rivalry is high due to the presence of several established competitors in the telecommunications industry, leading to intense competition for market share.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 84.67%
Debt Cost 5.29%
Equity Weight 15.33%
Equity Cost 5.29%
WACC 5.29%
Leverage 552.16%

11. Quality Control: Cogeco Inc. passed 2 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Cogeco

A-Score: 7.4/10

Value: 9.2

Growth: 6.0

Quality: 4.7

Yield: 10.0

Momentum: 6.0

Volatility: 8.7

1-Year Total Return ->

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Stock-Card
Cogeco

A-Score: 7.0/10

Value: 8.6

Growth: 4.7

Quality: 5.4

Yield: 9.0

Momentum: 5.0

Volatility: 9.0

1-Year Total Return ->

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Stock-Card
ATN International

A-Score: 5.3/10

Value: 9.0

Growth: 4.7

Quality: 3.2

Yield: 6.0

Momentum: 5.5

Volatility: 3.7

1-Year Total Return ->

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Stock-Card
TDS

A-Score: 5.3/10

Value: 8.3

Growth: 3.2

Quality: 3.3

Yield: 3.0

Momentum: 8.5

Volatility: 5.3

1-Year Total Return ->

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Stock-Card
Crexendo

A-Score: 4.6/10

Value: 2.4

Growth: 7.7

Quality: 7.4

Yield: 0.0

Momentum: 8.0

Volatility: 2.3

1-Year Total Return ->

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Stock-Card
Cable One

A-Score: 3.8/10

Value: 9.8

Growth: 4.1

Quality: 3.1

Yield: 3.0

Momentum: 0.0

Volatility: 2.7

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

70.93$

Current Price

70.93$

Potential

-0.00%

Expected Cash-Flows