On Dec 30, 2014, shares of Time Warner Cable Inc. (TWC), the second largest cable multi service operator (MSO) in the U.S., reached a new 52-week high of $155.91. However, the company ended the day’s trading at $154.67. The stock has surged roughly 17% over the past 12 months, and the company’s long-term earnings per share growth rate stands at a healthy 8.1%.
The Business Services segment is a major growth driver for the company that has benefited significantly from the rollout of TWC Max. Moreover, growing demand for cloud service offerings coupled with the acquisition of DukeNet will further lend support to step up high-speed data revenue growth and boost business revenues, going forward.
The addition of NBC Universal’s Sports, News and Entertainment Programming to its TV Everywhere application and a paid interconnection deal with Netflix Inc. should also drive Time Warner Cable’s revenues higher. Moreover, the launch of innovative services, continuous dividend payments and implementation of growth strategies are likely to act as tailwinds for the company, moving forward.
Notably, the small and mid-sized business (SMB) segment has become a huge growth opportunity for the cable TV industry. Time Warner Cable is expected to garner around $3 billion in revenues whereas Comcast Corp. (CMCSA), Cox Communications Inc. and Charter Communications Inc. (CHTR) are likely to generate approximately $4 billion, $2 billion and $1 billion in revenues, respectively, in 2014.
In Feb 2014, Comcast reached an agreement with Time Warner Cable to acquire the latter in an all-stock deal valued at around $45.2 billion. Post-completion of the deal, existing Time Warner Cable’s investors will hold about 23% of the merged entity. At present, the proposed merger between Comcast and Time Warner Cable is under strict regulatory scrutiny. A decision is expected in the first quarter of 2015.
Time Warner Cable currently carries a Zacks Rank #3 (Hold).
Key Picks from the Sector
A better-ranked stock worth considering in this sector is Liberty Global plc (LBTYA) with a Zacks Rank #2 (Buy).
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