Time Warner Cable Earnings Soar, May Spark Cable Rally
No. 2 Cable Operator Beats Analysts’ Expectations for Basic-Subscriber Growth, High-Speed-Data Customer Growth
By Robert Marich -- Broadcasting & Cable, 4/30/2008 7:37:00 AM
Time Warner Cable beat Wall Street expectations with in its first-quarter earnings Wednesday, prompting some to speculate that cable-systems stocks may rally should this prove to be a sector trend.
The metric that grabbed analysts was that Time Warner Cable reported a net gain of 55,000 basic-cable subscribers, while Wall Street expected net losses due to competition from telephone-company video services that first surfaced in 2005. While there’s a pitch battle for subscribers, overall consumer monthly bills are rising, so even with a headcount decline, cable makes out and any headcount gains provide more gravy.
For the quarter ended March 31, earnings per share when adjusting for special items were 24 cents versus Wall Street’s forecast of 22 cents. Including special items, net profit declined to $242 million, or 25 cents per share, from $276 million (28 cents) a year earlier. Revenue rose 8% to $4.2 billion.
Time Warner Cable is the nation’s second-largest multiple-system operator, and it is 84% owned by Time Warner, which indicated Wednesday that it plans to unload that stake but did not provide details.
Besides making gains in cable subscribers, Time Warner Cable said its broadband service posted a net gain of 304,000 broadband-Internet-access customers, which also surpassed Wall Street expectations. The company reported a 6% increase in advertising revenue per subscriber of $4.95, although it’s not clear if that was organic growth or from nonrecurring political advertising.
“We generated very robust customer growth in the quarter, including net additions of nearly 100,000 customer relationships and 900,000 revenue-generating units,” Time Warner Cable president and CEO Glenn Britt said in a statement. “We also added a record number of triple-play customers, helping to drive bundled penetration of customers who subscribe to two or more of our primary services to 50% of customer relationships.”
The company raised its guidance for cash-flow improvement to 40% for the year and reaffirmed other guidance, including a healthy 9% hike in revenue.
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