On Dec 17, we maintained our Neutral recommendation on Time Warner Cable Inc. (TWC). In the recently concluded third quarter of 2013, the company’s bottom line topped the Zacks Consensus Estimate while the top line missed the same.
Why Maintained at Neutral?
The Business Services segment became a major growth driver for Time Warner Cable. In the reported quarter, Commercial revenues were $594 million, up 20.5% year over year. All segments across the board – commercial data, business class phone, and mobile tower backhaul – are contributing significantly to the company. The company intends to double its Business Service revenues within 4 to 5 years.
Recently, the company decided to acquire a regional fiber-optic network company, DukeNet Communications LLC, for $600 million in cash. The proposed acquisition of DukeNet will further strengthen the Business Service division of Time Warner Cable. In the reported quarter, Time Warner Cable launched several innovative products and services. As a result, the average monthly revenue per user rose 2% to $105.
However, the company continues to lose video subscribers since 2009. Stiff competition from telecom, satellite TV and online video streaming operators along with mounting programming costs are taking a heavy toll on Time Warner Cable. Meanwhile, the stock price of Time Warner Cable has soared 56% in the last one year and is presently trading at the high end of the 52-week range.
Time Warner Cable carries a Zacks Rank #3 (Hold).
Other Stocks Outlook in Related Industries
Other stocks worth considering in this sector include Comcast Corp. (CMCSA), Verizon Communications Inc. (VZ) and Netflix Inc. (NFLX). Currently, all three have a Zacks Rank #2 (Buy).
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