On Dec 17, we maintained our Neutral recommendation on
Time Warner Cable Inc.
). In the recently concluded third quarter of 2013, the company's
bottom line topped the Zacks Consensus Estimate while the top
line missed the same.
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Why Maintained at Neutral?
The Business Services segment became a major growth driver for
Time Warner Cable. In the reported quarter, Commercial revenues
were $594 million, up 20.5% year over year. All segments across
the board - commercial data, business class phone, and mobile
tower backhaul - are contributing significantly to the company.
The company intends to double its Business Service revenues
within 4 to 5 years.
Recently, the company decided to acquire a regional fiber-optic
network company, DukeNet Communications LLC, for $600 million in
cash. The proposed acquisition of DukeNet will further strengthen
the Business Service division of Time Warner Cable. In the
reported quarter, Time Warner Cable launched several innovative
products and services. As a result, the average monthly revenue
per user rose 2% to $105.
However, the company continues to lose video subscribers since
2009. Stiff competition from telecom, satellite TV and online
video streaming operators along with mounting programming costs
are taking a heavy toll on Time Warner Cable. Meanwhile, the
stock price of Time Warner Cable has soared 56% in the last one
year and is presently trading at the high end of the 52-week
Time Warner Cable carries a Zacks Rank #3 (Hold).
Other Stocks Outlook in Related Industries
Other stocks worth considering in this sector include
Verizon Communications Inc.
). Currently, all three have a Zacks Rank #2 (Buy).