Will Time Warner Cable (TWC) Earnings Outperform? - Analyst Blog


Time Warner Cable Inc. ( TWC ) is scheduled to report its first-quarter 2014 results before the opening bell on April 24, 2014.

Why a Likely Positive Surprise?

Our proven model shows that Time Warner Cable is likely to beat earnings because it has the right combination of two key ingredients.

Zacks ESP: Earnings ESP , which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +0.60%. This is a meaningful and leading indicator of a likely positive earnings surprise.  

Zacks Rank: Time Warner Cable currently has a Zacks Rank #3. Note that stocks with Zacks Ranks of #1 (Strong Buy), 2 (Buy) or 3 (Hold) have a significantly higher chance of beating earnings. The Sell-rated stocks (Zacks Rank #4 and 5) should never be considered going into an earnings announcement.

The combination of Time Warner Cable's Zacks Rank #3 and +0.60% ESP makes us reasonably confident in looking for a positive earnings beat.

What is Driving the Better-Than-Expected Earnings?

The U.S. pay-TV industry is 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 cheaper substitutes, such as online video streaming services, have imposed mounting pressure on the traditional pay-TV operators, and Time Warner Cable is no exception.

As a survival strategy, management has decided to implement a three-year plan: adding significant residential customers and maintaining the momentum in the upcoming quarters, gaining customer confidence by means of enhancing customer service, and deploying advanced and innovative video services which include cloud-based guide, VOD and DVR products. We view the change in Time Warner Cable's business model favorably.  

However, persistent loss of video customers despite implementing several strategies is a major concern. Except for Time Warner Cable, almost all cable and satellite TV operators gained video subscribers in the previous quarter.

Other Stocks to Consider

Other companies you may want to consider on the basis of our model which shows that these have the right combination of elements to post an earnings beat this quarter include:

Dish Network Corp. ( DISH ) with earnings ESP of +4.65% and Zacks Rank #3.

Charter Communications, Inc. ( CHTR ) with earnings ESP of +40.0% and Zacks Rank #3.

DIRECTV ( DTV ) with earnings ESP of +3.36% and Zacks Rank #3.

CHARTER COMM-A (CHTR): Free Stock Analysis Report

DISH NETWORK CP (DISH): Free Stock Analysis Report

DIRECTV (DTV): Free Stock Analysis Report

TIME WARNER CAB (TWC): Free Stock Analysis Report

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Zacks Investment Research

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 , Earnings , Stocks

Referenced Stocks: CHTR , DISH , DTV , TWC



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