We upgrade our recommendation to Neutral on
Time Warner Cable Inc.
), the second largest cable MSO in the U.S., ahead of its first
quarter of 2013 financial results.
Why the Upgrade?
We expect Time Warner Cable to perform well in the near future
mainly due to: (1)acquisitions of NewWave, NeviSite, and Insight,
which have enhanced the company's financials and (2) growing
demand for residential high-speed Internet service and Business
We view the change in Time Warner Cable's business model as
positive. The U.S. pay-TV industry is at present facing
significant challenges from several fronts. Economic volatility
in the U.S., growing competitive threat from fiber-based TV
services of telecom operators and availability of online video
streaming services, have imposed mounting pressure on the
traditional pay-TV operators.
As a survival strategy, management has decided to adopt a four
pronged approach: (1) rebrand itself as a major broadband service
provider for residential customers (2) aggressively penetrate the
commercial business segment (3) change in marketing strategy like
product segmentation and (4) significant enhancement of
shareholders' wealth, such as systematic share repurchase and
increase in dividend rate. At present, Time Warner Cable has a
Zacks Rank #3 (Hold).
Balanced View on Time Warner Cable
Meanwhile, the company continues to losebasic video
subscribers without any interruption since 2009. We do not know
when this trend will ultimately reverse. 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's finances.
), the company is suffering from lack of any media asset.
), Time Warner Cable is lacking geographical diversification as
it operates only within the U.S.
DISH Network Corp.
) is trying hard to become an integrated wireless-satellite TV
bundled service provider.
Nevertheless, over the last three years, the company has been
systematically enhancing its shareholders' wealth either through
a share repurchase program or by increasing its dividend rate.
The Board of Directors of Time Warner Cable decided to hike its
regular quarterly dividend from $0.56 per share to $0.65 per
share, a significant jump of 16%.
COMCAST CORP A (CMCSA): Free Stock Analysis
DISH NETWORK CP (DISH): Free Stock Analysis
DIRECTV (DTV): Free Stock Analysis Report
TIME WARNER CAB (TWC): Free Stock Analysis
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