On May 29, 2015, we issued an updated research report on Charter Communications, Inc. CHTR.
Charter reported disappointing first-quarter 2015 financial results. The company saw loss in the quarter in contrast to the Zacks Consensus Estimate of net income. The top line also failed to meet the mark.
Recently, Charter made two major announcements pertaining to pending deals. The company has reached an agreement to buy Time Warner Cable – the second largest cable multi-service operator (MSO) in the U.S. The value of the deal stands at $78.7 billion, including debt. Taking into account Time Warner Cable's diluted shares outstanding as of Mar 31, the value of the stock portion of the deal has been pegged at $55.76 billion. Moreover, as per the latest quarterly report, Time Warner Cable has long-term debt of $22.64 billion.
We remind investors that in Jan 2014, Charter had offered $132.50 per share of Time Warner Cable, including $83 in cash. However, the company had lost to Comcast’s higher bid of $158.82 per Time Warner Cable share. Meanwhile, in the month of Apr 2015, Comcast had put an end to its 14-month long negotiation of the $45.2 billion takeover deal concerning Time Warner Cable owing to strong reservations expressed by the Federal Communications Commission (FCC) and the Department of Justice.
Also, Charter will take over Bright House – the sixth largest U.S. cable operator – for $10.4 billion. The Time Warner Cable and Bright House deals are likely to benefit Charter in terms of geographic expansion and operating cost synergies, which will in turn boost its bottom line and free cash flow. Charter will also be able to offer enhanced services and more streaming video product options.
At the end of the quarter under review, Charter had $20,964 million of outstanding debt compared with $21,023 million at the end of 2014. Also, the debt-to-capitalization ratio stood at 0.99, flat sequentially.
Charter currently has a Zacks Rank #3 (Hold).
Stocks to Consider
Better-ranked stocks in this sector include Comcast Corporation CMCSA, Liberty Global plc LBTYA and TELUS Corporation TU. All these stocks hold a Zacks Rank #2 (Buy).
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