Time Warner Reports Strong 4Q - Analyst Blog

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Time Warner Cable Inc. ( TWC ) reported strong fourth-quarter 2011 financial results, with both the top line and bottom line beating the Zacks Consensus Estimate. During the earnings call, the company also sanctioned a share repurchase program worth $4 billion and hiked its quarterly dividend by 17% to 56 cents.

Quarterly GAAP net income was $564 million or $1.75 per share compared with a net income of $392 million or $1.09 per share in the prior-year quarter. Fourth-quarter 2011 adjusted (excluding special items) EPS of $1.39 handily beat the Zacks Consensus Estimate of $1.21.

Total revenue in the quarter increased 4% year over year to $4,993 million, surpassing the Zacks Consensus Estimate of $4,969 million.

Quarterly adjusted operating income before depreciation and amortization (OIBDA) climbed 8.7% year over year to $1,889 million. GAAP operating income grew 3.5% year over year to $1,029 million.

During the fourth quarter of 2011, Time Warner Cable repurchased 5.7 million shares for a total consideration of $366 million. In the reported quarter, the company also paid $154 million in dividends.

Operating cash flow at the end of fiscal 2011 was $5,688 million compared with $5,218 million at the end of fiscal 2010. Free cash flow (cash flow from operations less capital expenditure together and cash paid for intangible assets and other) at the end of fiscal 2011 was $2,751 million compared with $2,346 million at the end of fiscal 2010.

At the end of the fourth quarter of 2011, Time Warner Cable had $5,177 million in cash & marketable securities compared with $3,047 million at the end of fiscal 2010. Total debt at the end of the reported quarter was $24,320 million compared with $23,121 million at the end of fiscal 2010. At the end of the fourth quarter of 2011, debt-to-capitalization ratio was 0.76 compared with 0.72 at the end of fiscal 2010.

Residential Services Segment

Quarterly total revenue was $4,284 million, up 2.6% year over year. Within the segment, video revenue was $2,628 million, up 0.2% year over year. High-speed data revenue was $1,148 million, up 8.6% year over year. Voice revenue was $495 million, up 2.5% year over year. Other revenue was $13 million, up 8.3% year over year.

Business Services Segment

Quarterly revenue was $409 million, up 37.2% year over year. Within the segment, video revenue was $74 million, up 7.2% year over year. High-speed data revenue was $196 million, up 23.3% year over year. Voice revenue was $57 million, up 50% year over year. Wholesale transport revenue was $44 million, up 46.7% year over year. Other revenue was $38 million.

Advertising Segment

Advertising revenue declined 10% year over year to $242 million.   

Other Segment

Other revenue was $58 million, down 1.7% year over year.

Subscriber Statistics

At the end of the reported quarter, Residential Video subscribers were 11.889 million, down 129,000 sequentially. Commercial Video subscribers were 172,000, up 2,000 sequentially.

Residential High-speed Data subscribers were 9.954 million, up 117,000 sequentially. Commercial High-speed Data subscribers were 390,000, up 15,000 sequentially. Residential Digital Phone subscribers were 4.544 million, up 63,000 sequentially. Commercial Digital Phone subscribers were 163,000, up 14,000 sequentially.

In the previous quarter, Time Warner Cable gained 49,000 Triple play subscribers totaling 3.838 million, added 44,000 Double play subscribers totaling 4.925 million, and also lost 76,000 Single play subscribers to 5.748 million.

Recommendation

We believe that stiff competition from online video streaming companies like Netflix, Inc ( NFLX ) and Hulu, will hurt profitability and result in loss of customers going forward. However, increase in rates coupled with continuous deployment of DOCSIS 3.0 technology will drive the commercial segment revenue going forward.Moreover, increased demand for internet users will further drive top-line growth going forward. We, thus, maintain our long-term Neutral recommendation on Time Warner Cable.

Currently, Time Warner Cable has a Zacks #3 Rank, implying a short-term Hold rating on the stock.


 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: NFLX , TWC

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