Time Warner Cable Inc. TWC, the second-largest cable MSO in the U.S., is slated to release its first-quarter 2015 results on Apr 30, before the opening bell.
Last quarter, Time Warner Cable had delivered a negative earnings surprise of 2.87%. Incidentally, the company’s earnings have missed the Zacks Consensus Estimate in three of the last four quarters, which leads to an average miss of 0.28%. Let’s see how things are shaping up for this announcement.
Factors Likely to Influence this Quarter
Recently, Comcast Corp. CMCSA abandoned its 14-month old plans for the $45.2 billion mega takeover of Time Warner Cable owing to strong reservations expressed by the Federal Communications Commission (FCC). However, once this news surfaced, Charter Communications Inc. CHTR took up the opportunity and started exploring options to bid for Time Warner Cable. Notably, the combined Charter Communications-Time Warner Cable entity will become the third largest pay-TV operator in the U.S.
The Business Services segment remains a major growth driver for the company. Moreover, Time Warner Cable’s ARPU continues to improve on the back of the launch of innovative services and the success of the TWC TV App. In addition, continuous dividend payment and implementation of growth strategies are likely to serve as tailwinds for the company in the coming quarters.
However, stiff competition from cable and telecom players, mounting programming expenses and a highly leveraged balance sheet may continue to impede growth.
Earnings Whispers
Our proven model does not conclusively show that Time Warner Cable is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here as elaborated below:
Zacks ESP: Time Warner Cable has an earnings ESP of -1.60%. This is because the Most Accurate estimate stands at $1.84 while the Zacks Consensus Estimate is pegged higher at $1.87.
Zacks Rank: Time Warner Cable has a Zacks Rank #3 which increases the predictive power of ESP. However, we need to have a positive ESP to be confident of an earnings surprise.
On the other hand, we caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stock to Consider
Here is a company that you may consider instead, as our model shows it has the right combination of elements to post an earnings beat this quarter:
Liberty Media Corporation LMCA, with earnings ESP of +18.18% and a Zacks Rank #3.
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