Time Warner Cable Inc.
(
TWC
) is slated to release its third-quarter 2012 results on
Wednesday, October 31, before the opening bell. The Zacks
Consensus Estimate for the quarter is pegged at $1.41,
representing growth of 27.03% from the year-ago quarter.
With respect to earnings surprises, Time Warner has
outperformed the Zacks Consensus Estimate in three of the last
four quarters with an average beat of 6.52%.
First Quarter Recap
On August 2, Time Warner reported its second-quarter 2012
financial results. Quarterly GAAP net income was approximately
$452 million or $1.43 per share compared with a net income of
$420 million or $1.24 per share in the prior-year quarter.
Adjusted earnings per share (excluding special items) of $1.48 in
the reported quarter handily beat the Zacks Consensus Estimate of
$1.38.
Quarterly net revenue increased 9.3% year over year to $5,404
million, surpassing the Zacks Consensus Estimate of $5,367
million. Quarterly adjusted operating income before depreciation
and amortization (OIBDA) climbed 10.3% year over year to $2,011
million. GAAP operating income grew 9.6% year over year to $1,990
million.
Agreement of Estimate Revisions
In the last 30 days, out of the 16 estimates, 5 revised upward
while 2 moved in the opposite directions for the third quarter.
For the fourth quarter of 2012, out of the 17 estimates, 5 upward
revisions were witnessed, while one moved downward over the same
timeframe.
For 2012, in the last 30 days, out of the 17 estimates, there
were 7 upward revisions while no downward revision was witnessed.
For 2013, out of the 21 estimates, 8 were revised upward, while
one moved in the opposite direction over the same period.
Magnitude of Estimate Revisions
Over the last 30 days, the current Zacks Consensus Estimate
has improved by 2 cents for both third and fourth quarter of
2012. The current Zacks Consensus Estimate improved by 4 cents
for 2012 over the last 30 days, while the estimate has improved
by 14 cents for 2013 over the same time frame.
Our Recommendation
We believe that continuous loss of subscribers coupled with
stiff competition from online video streaming companies like
Netflix, Inc.
(
NFLX
) and Hulu will hurt profitability going forward. Additionally,
telecom service providers like
Verizon Communication
(
VZ
) and
AT&T Inc.
(
T
) are quickly gaining market from the cable MSO's by offering
fibre-based TV, which is believed to be a threat for Time
Warner.
However, the company's strategy of rebranding itself as a
major broadband service provider for residential customers is
expected to generate significant subscriber growth for its
broadband segment. Business segment became a major growth driver
for Time Warner Cable and continuous deployment of DOCSIS 3.0
technology will drive the commercial segment revenue going
forward. Moreover, the acquisition of NaviSite will allow the
company to expand its presence in the fast-growing cloud-based
service business.
We maintain our long-term Neutral recommendation on Time
Warner Cable. However, the company has a Zacks #2 Rank, implying
a short-term Buy rating.
NETFLIX INC (NFLX): Free Stock Analysis
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AT&T INC (T): Free Stock Analysis Report
TIME WARNER CAB (TWC): Free Stock Analysis
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VERIZON COMM (VZ): Free Stock Analysis Report
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