Time Warner Cable (TWC) just released its third-quarter earnings report. With more people preferring streaming services over traditional cable television, was Time Warner able to maintain subscribers? And, with Comcast in the process of acquiring Time Warner Cable, is now a good time to buy TWC stock?
Time Warner Cable Profile
Time Warner Cable is a name you’re probably familiar with. It is the second-largest cable operator in the U.S., offering the usual services of video, high-speed data and voice over its broadband cable systems to residential and business customers.
As of Sept. 30, Time Warner Cable serves 15 million customers. In February, Comcast announced plans to buy Time Warner Cable in an all-stock deal for $45 billion. Under the terms of the deal, which is subject to regulatory approval, each TWC share will be exchanged for 2.875 shares of CMCSA. As of yesterday’s closing prices, this represents a 9.3% premium over where TWC is trading right now.
Time Warner Cable Earnings Rundown
In the third quarter, Time Warner reported a 3.6% year-over-year increase in revenue, rising to $5.71 billion. Over the same period, business services revenue jumped 21.9% to $724 million. Despite higher revenue, Time Warner’s third-quarter profit dipped as costs increased. Net income fell to $499 million, or $1.76 per share, down from $532 million, or $1.84 per share, last year. Adjusted earnings per share were $1.86, missing analysts’ consensus estimates of $1.91 per share.
Time Warner also lost more customers during the third quarter than expected; Time Warner Cable lost 184,000 household video customers alone. As of Sept. 30, Time Warner has 10.8 million household video customers, down 5.3% from the previous year.
TWC Stock’s Current Ratings
Now, if you go to the stock report page for TWC, you’ll notice that this conservative stock has been consistently rated as a buy over the past year. TWC’s buying pressure is solid so it receives a “B” for its Quantitative Grade.
However, Time Warner stock’s fundamental metrics are lackluster, with earnings momentum (B) and return on equity (A) being the company’s only strong points. As for the other six metrics, TWC could improve its sales growth (D), operating margin growth (D), earnings growth (C), earnings surprise (D), analysts’ earnings revisions (C), and cash flow (C). TWC receives a “C” for its Fundamental Grade.
As of this post on Oct. 31, I consider TWC a “B-rated (cautious) buy.” Time Warner Cable stock is attracting decent buying pressure, but because its fundamentals are mixed it is at a risk of being downgraded to a “hold.”
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
