Rogers Looking To EVs To Drive Growth Acceleration

 

If you want a picks-and-shovels play on passenger vehicle electrification, advanced driver-assistance systems (or ADAS), 5G infrastructure, automation, and IoT, Rogers (ROG) might be worth a look. There’s ample competition from companies like Kyocera (OTCPK:KYOCY) and Shin-Etsu (OTCPK:SHECY) in various business lines, but Rogers has managed to distinguish itself in the past with product development, and management is keenly focused on leveraging the company’s capabilities in areas like metalized ceramic substrates, high-frequency laminates, and specialty polyurethanes/silicones to benefit from growth in those aforementioned markets.

In the four and a half years since I last covered Rogers for Seeking Alpha, the shares have outperformed the S&P 500, Kyocera, and Shin-Etsu, kept pace with the NASDAQ, and lagged the semiconductor space. Relative to my modeling expectations, Rogers underperformed on revenue growth (my primary concern at the time) but did outperform on margins.

At this point, Rogers trades like you’d probably expect a play on EV/hybrids, power electronics, and sensors would, which is to say the shares aren’t obviously cheap. Double-digit revenue growth and meaningful margin improvement from here can drive a worthwhile return, and there are certainly opportunities for Rogers to outperform, but I don’t see the shares as a huge bargain right now.

 

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Rogers Looking To EVs To Drive Growth Acceleration

Rogers Corp. Looking To Harness Focused Innovation And Operating Efficiency

There is no shortage of suppliers of circuit materials, polyurethane and silicone materials, or electronic substrates. Many of these markets are heavily commoditized, with competitors in Asia and Europe using scale and low-cost labor or automation to manufacture broad ranges of basic products as cheaply as possible.

That's not the model that Rogers Corp. (NYSE:ROG) is using. Instead, this small specialty materials company is looking to use selective innovation targeting more demanding high-growth applications to generate above-average growth and profitability. Management has not been shy about laying out ambitious growth targets and the Street has largely factored those into the valuation. While the valuation is not so compelling at this point, this under-covered company is worth following in the hopes of taking advantage of a pullback.

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Rogers Corp. Looking To Harness Focused Innovation And Operating Efficiency

Seeking Alpha: After A Good Run, It's "À Bientôt" For Quebecor

Canadian (or more accurately, French-Canadian) communications company Quebecor (OTCPK:QBCRF)(QBR-B.TO) has been a pretty solid pick for me over the past fourteen months or so, as the shares have risen about 40% from my initial recommendation and 20% from my last update on the company. Now, though, the shares are trading close to fair value and I'm not convinced there's enough reward in play for the risk at hand. Whether the company plans to go forward with a national wireless development plan, whether it buys out Caisse's 25% stake in Quebecor Media, and how the company allocates capital within its existing operations all are sizable unknowns that stack up pretty evenly with the prospects of better wireless performance within Quebec.

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After A Good Run, It's "À Bientôt" For Quebecor

Seeking Alpha: Quebecor Has A Big Decision To Make In Wireless

These are interesting days for Quebecor (OTCPK:QBCRF) (QBR-B.TO). The Canadian government has made it clear that they'd like a fourth national wireless service provider, but Quebecor has been cagey about how it will approach this opportunity - leaving a lot of speculation and concern in the market as to the company's plans. In the meantime, the newly restructured media assets business seem to be doing better, while the company's Videostron operation is trying to balance weak subs with better margins.

I liked Qubecor in early February, thinking that the market was underestimating what the company could do with its margins and applying too much of a discount to the wireless operations. The shares are up more than 15% since then, beating the S&P 500 and keeping pace with the TSX. Quebecor has also done quite a bit better than BCE (NYSE:BCE) and Telus (NYSE:TU) over that stretch. I still think there's double-digit potential in these shares, but readers considering them should recognize that greater clarity on the company's wireless plans may be a key in getting more value into the stock price.

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Quebecor Has A Big Decision To Make In Wireless

Seeking Alpha: Quebecor's Efforts To Improve Growth And Margins Not Fully Rewarded

Even though trading Canadian stocks has gotten quite a bit easier in recent years, a lot of Canadian companies don't really get the sort of attention you might expect if they were a U.S. company. Quebecor (OTCPK:QBCRF) (QBR-B.TO) looks like a good case in point, as this large
Montreal-based media holding company is all but unknown to many American investors.

With their high debt levels and distant free cash flow streams, media and communications companies can be tricky to value and Quebecor is no exception. I do like the company's efforts to reduce its exposure to the low margin and declining newspaper business, as well as the company's willingness to let BCE's (BCE) Bell Canada gain share at the cost of margins. The market is likely to remain nervous about the company's ambitions in wireless and its growth potential in cable, but I believe a fair value above C$30 makes these shares worth considering.

Quebecor's unsponsored ADRs trade infrequently and I would strongly suggest buying the Toronto-listed shares. Many (if not most) brokerages allow U.S. investors to buy and sell Canadian stocks at reasonable commissions.

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Quebecor's Efforts To Improve Growth And Margins Not Fully Rewarded