We reiterate our long-term Neutral recommendation on Time Warner Cable Inc. (TWC) following its mixed financial results for the first quarter of 2013. Net income surpassed the Zacks Consensus Estimate but revenues fell below the same. Time Warner Cable currently has a Zacks Rank #3 (Hold).
Why Kept at Neutral?
Time Warner Cable is continuously losing video subscribers since 2009. We do not know when this trend will ultimately reverse. In the first quarter of 2013, Time Warner Cable lost 119,000 residential video customers compared with 94,000 in the prior-year quarter. 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.
In the U.S., cable operators such as Time Warner Cable and Comcast Corp. (CMCSA) are facing fierce competition from telecom service providers. Verizon Communications Inc. (VZ) and AT&T Inc. (T) are quickly gaining market share from cable MSOs by offering fiber-based TV and other high-speed broadband services. Verizon added a net 169,000 and AT&T added 232,000 video subscribers in the last quarter.
Nevertheless, we believe that the top line will improve going forward mainly due to the acquisitions of NewWave, NeviSite, and Insight, which have enhanced the company’s financials. The company has also benefited from the growing demand in the Residential high-speed Internet and Business services segments.
Time Warner Cable generated significant subscriber growth for its broadband and digital phone services. In the first quarter of 2013, Residential Services revenues increased 4% despite facing huge video customer loss. This was mainly attributed to 17.3% growth of high-speed broadband services (Internet data) and 2.2% growth of voice revenues.Read the Full Research Report on TWC
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