Shares of Time Warner Cable Inc. TWC hit a 52-week high of $194.49 on Mar 1 and have been on the rise since it reported fourth-quarter 2015 results on Jan 28.
Time Warner Cable reported better-than-expected financial numbers in the fourth quarter of 2015 wherein both the top and the bottom line surpassed the Zacks Consensus Estimate. Since the earnings release, the stock has gained nearly 9%.
Recently, the Federal Communications Commission (FCC) postponed the estimated cut-off date on the pending review for Charter Communications, Inc.’s CHTR proposed takeover of Time Warner Cable.
Notably, the deal has been approved by shareholders of both the companies while a go-ahead from the U.S. Department of Justice and FCC is awaited. Thus, if approved, the deal with Charter Communications is a huge plus for Time Warner Cable which is getting marginalized gradually by fiber-based video offerings of telecom giants and online video streaming services of low-cost operators.
The Business Services segment has emerged as a major growth driver for Time Warner Cable. In the reported quarter, Business service revenues totaled $864 million, up 14.4% year over year. The company intends to double its Business Service revenues within 4 to 5 years.
In addition, Time Warner Cable’s increased traction in the small and mid-sized Business (SMB) segment should garner significant revenues in the near future. Meanwhile, the company boasts a huge base of large enterprise customers.
Adding to the positives, Time Warner Cable registered record full-year residential subscriber growth in 2015. Notably, net additions of customer relationships came in at 618,000 while voice net additions tally rose by 1.036 million. Further, high-speed data subscriber count increased by 1 million.
However, the real achievement for the company was video net additions of 32,000, the company’s first gain in nine years. We believe the impressive video gain marks a reversal amid industry concerns over cord cutting.
Nonetheless, growing competitive threat, lack of an innovative business model, high debt-levels, heavy capital expenditures and a saturated multi-channel video market in the U.S. are certain factors that may weigh upon the company’s performance going forward.
Zacks Rank & Stocks to Consider
Time Warner Cable currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the sector include Dish Network Corp. DISH and Cablevision Systems Corporation CVC. Both the stocks hold a Zacks Rank #2 (Buy).
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