On Mar 10, 2014, we issued an updated research report on Time Warner Cable Inc. (TWC). Recently, the struggling cable company has decided to sell its business to Comcast Corp. (CMCSA) for $45.2 billion.
Time Warner Cable has delivered positive earnings surprise in all four quarters last year, with an average beat of 3.4%. The company reported fourth quarter 2013 financial results with both top and bottom line beating the Zacks Consensus Estimate.
Recently, the company completed the acquisition of DukeNet which has an extensive fiber-optic network across many states. Hence, we believe that successful integration of DukeNet coupled with increased political ad spending in 2014 will continue to strengthen the Business Service division of Time Warner Cable.
Moreover, hike in dividends coupled with implementation of several growth strategies may act as tailwinds for the company in 2014. Furthermore, shifting its lower tier subscribers to upper tier will further drive ARPU for the company going forward.
Time Warner Cable intends to complete the deployment of cloud-based guide to 6 million set-top devices by the end of 2014. In addition, the company also plans to boost network speed by segregating different markets into TWC Max fully-digital markets willact as catalyst for the company.
On the downside, Time Warner Cable is facing the brunt of growing competition as large telecom operators, such as Verizon Communications Inc. (VZ) and AT&T Inc. (T) are gaining strong foothold in this field. Moreover, low-cost video streaming offerings by companies like Netflix and Hulu will further affect the company’s subscriber growth.
Furthermore, Time Warner Cable ‘s highly leveraged balance sheet, mounting programming cost and deteriorating cash position may act as headwinds for the company while moving ahead.
Time Warner Cable currently carries a Zacks Rank #3 (Hold).
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