We reiterate our long-term Neutral recommendation on
Time Warner Cable Inc.
) following its mixed financial results for the first quarter of
2013. Net income surpassed the Zacks Consensus Estimate but
revenues fell below the same. Time Warner Cable currently has a
Zacks Rank #3 (Hold).
Why Kept at Neutral?
Time Warner Cable is continuously losing video subscribers
since 2009. We do not know when this trend will ultimately
reverse. In the first quarter of 2013, Time Warner Cable lost
119,000 residential video customers compared with 94,000 in the
prior-year quarter. Growing competitive threats from telecom,
satellite TV and online video streaming operators along with
steadily increasing programming costs are taking a heavy toll on
Time Warner Cable.
In the U.S., cable operators such as Time Warner Cable and
) are facing fierce competition from telecom service providers.
Verizon Communications Inc.
) are quickly gaining market share from cable MSOs by offering
fiber-based TV and other high-speed broadband services. Verizon
added a net 169,000 and AT&T added 232,000 video subscribers
in the last quarter.
Nevertheless, we believe that the top line will improve going
forward mainly due to the acquisitions of NewWave, NeviSite, and
Insight, which have enhanced the company's financials. The
company has also benefited from the growing demand in the
Residential high-speed Internet and Business services
Time Warner Cable generated significant subscriber growth for
its broadband and digital phone services. In the first quarter of
2013, Residential Services revenues increased 4% despite facing
huge video customer loss. This was mainly attributed to 17.3%
growth of high-speed broadband services (Internet data) and 2.2%
growth of voice revenues.
COMCAST CORP A (CMCSA): Free Stock Analysis
AT&T INC (T): Free Stock Analysis Report
TIME WARNER CAB (TWC): Free Stock Analysis
VERIZON COMM (VZ): Free Stock Analysis Report
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