Time Warner Cable Inc.
) 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
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
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
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
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 revenue declined 10% year over year to $242
Other revenue was $58 million, down 1.7% year over year.
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
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.
We believe that stiff competition from online video streaming
) 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
Currently, Time Warner Cable has a Zacks #3 Rank, implying a
short-term Hold rating on the stock.
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