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Why Charter Communications Stock Jumped 12% in January

Chris Neiger, The Motley Fool

What happened

Shares of Charter Communications, Inc. (NASDAQ: CHTR) rose 12.3% last month, according to data provided by S&P Global Market Intelligence, after news reports started showing higher-than-expected earnings for some large companies because of the recently passed tax reform changes.

So what

While it might seem odd that investors would push up a company's share price due to tax reform, it's likely that they thought Charter Communications might also partake in similar tax benefits that Verizon revealed in mid-January.

A blue stock chart with numbers in the background and yellow line graphs.

Image source: Getty Images.

That expectation was met when Charter reported its fourth-quarter 2017 results at the beginning of this month and its earnings skyrocketed to $9.55 billion in the quarter, up from $454 million a year ago.

As Charter CFO Chris Winfrey said on the earnings call, "[W]e generated $9.6 billion of net income attributable to Charter shareholders in the fourth quarter. $9.3 billion of that is related to a noncash, tax benefit given the reduction in our deferred tax liability as a result of tax reform."

Now what

Charter's shares have been down about 4% since the beginning of the month, but that's likely due to drops in the overall stock market. The S&P 500 has shed more than 5% in February. Even with the benefits of tax reform, Charter Communications and its investors likely have a long road ahead as cord-cutting among consumers continues to rise.

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Chris Neiger has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Verizon Communications. The Motley Fool has a disclosure policy.