Leading U.S cable TV operator, Charter Communications Inc. (CHTR), primarily offers three services – video, high-speed data and voice over its broadband cable systems to both residential and business customers.
In May 2015, Charter Communications reached an agreement to buy Time Warner Cable. The value of the deal stands at $78.7 billion, including debt. The company also announced to take over Bright House for $10.4 billion. If approved, the Time Warner Cable and Bright House deals are likely to benefit Charter by way of geographic expansion and operating cost synergies, which in turn should boost its bottom line and free cash flow, going forward.
Charter Communications also stands to benefit from U.S. cable multi service operators’ (MSOs) dominance in the high-speed broadband (Internet) market. Notably, as of Mar 31, 2015, Charter had 4.153 million video, 4.891 million Internet and 2.481 million voice customers in the residential segment. Also, during the first quarter, the company had gained 125,000 high-speed Internet and 42,000 voice customers.
However, in the event of Charter Communications failing to get the Federal Communications Commission (“FCC”) approval for its impending buyout of Time Warner Cable, it would be rather difficult for the former to survive independently in the highly competitive pay-TV market. Moreover, a saturated multi-channel U.S. video market and competition from low-cost online video streaming service providers might weigh on the second quarter’s performance further.
Charter Communications currently carries a Zacks Rank #5 (Strong Sell). The company has generated a massive negative average earnings surprise of 684.79% in the previous four quarters. We have highlighted some of the key stats from this just-revealed announcement below:
Earnings: Charter Communications incurred a loss of $1.09 per share in the second quarter of 2015, which compared unfavorably with the Zacks Consensus Estimate of earnings of 35 cents per share.
Revenue: Charter Communications generated total revenue of $2,430 million, above the Zacks Consensus Estimate of $2,415 million.
Key Stats to Note: During the second quarter of 2015, residential high-speed Internet subscribers rose by 70,000 to 4.961 million. Voice subscribers grew 33,000 to 2.514 million. However, video subscribers decreased by 33,000 to 4.120 million.
Stock Price: At the time of writing, the stock price of Charter Communications was down nearly 2.3% ($4.31) in the pre-market trade on Nasdaq. Clearly the initial reaction to the release is negative. We view the company’s substantial loss as the primary reason responsible for this negative sentiment.
Check back later for our full write up on this Charter Communications earnings report later!
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