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Manitoba Telecom: Earnings Analysis


The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2013-12-312014-03-302014-06-292014-09-292014-12-31
Relevant Numbers (Quarterly)
Revenues (mil)408.5401.5403.3402.4404.8
Revenue Growth (%YOY)-1.11-1.2863.02-1.47-0.91
Earnings (mil)-87.841.928.836.824.2
Earnings Growth (%YOY)-337.335.62.1344.88127.56
Net Margin (%)-21.4910.447.149.155.98
EPS-1.250.540.370.470.31
Return on Equity (%)-33.8515.2610.5813.478.94
Return on Assets (%)-13.456.354.415.563.62

Market Share Versus Profits

Companies sometimes focus on market share at the expense of profits or earnings growth.

MBT-CA’s change in revenue compared to the same period last year of -0.91% lagged its change in earnings which was 127.56%. The company’s performance in this period suggests an effort to boost profitability. While this is good to a point, the fact that the company’s revenue performance is lower than the average of the results announced to date by its peers does not bode well from a long-term market share perspective. Also, for comparison purposes, revenues changed by 0.60% and earnings by -34.24% compared to the immediate last quarter.

 

Earnings Growth Analysis

The company’s earnings rose year-on-year. But, this growth has not come as a result of improvement in gross margins or any cost control activities in its operations. Gross margins went from 33.52% to 34.64% for the same period last year, while operating margins (EBITDA margins) went from 33.52% to 34.64% over the same time frame.

Cash Versus Earnings – Sustainable Performance?

MBT-CA’s year-on-year change in operating cash flow of 26.72% trailed its change in earnings. This leads Capital Cube to question whether the earnings number might have been achieved from some unlocking of accruals. In addition, the increase in operating cash flow was less than the average announced thus far by its peer group.

Margins

The company’s operating (EBIT) margins contracted from 14.37% to 11.96%. In spite of this, the company’s earnings rose. This was influenced primarily by one-time items, which improved pretax margins from -28.91% to 7.73%

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EPS Growth Versus Earnings Growth

Company Profile

Manitoba Telecom Services, Inc. provides telecommunications services. It operates through two segments: MTS and Allstream. The MTS segment provides a full range of wireless, broadband, high-speed Internet, IPTV, converged IP, unified communications, security, home alarm monitoring, local access and long distance services to residential and business customers. The Allstream segment offers IP-based communications, unified communications, hosting, voice and data connectivity, and security services to business customers in Canada. Manitoba Telecom Services was founded in 1908 and is headquartered in Winnipeg, Canada.