Time Warner Cable misses on Q2 earnings, revenue
Time Warner Cable (TWC) missed Wall Street expectations on second-quarter earnings and revenue, as programming costs continued to rise and customers migrate from traditional pay-TV service.
The company, which Charter Communications is seeking to acquire, reported earnings of $1.54 per share, falling short of analysts' estimate of $1.81. Revenue of $5.93 billion rose 3.5%, but missed expectations of $5.94 billion, according to Thomson Reuters I/B/E/S.
Net income fell 7.2% to $463 million, from $499 million in the second quarter of last year.
The cost of programming for TWC's pay-TV service rose 8.7% to $1.4 billion as the company acquired the rights for the Los Angeles Lakers and L.A. Dodgers for its SportsNet LA regional sports network. That led to a 11.6% increase in monthly programming costs for subscribers to $42.73.
The pay-TV and Internet provider lost 45,000 video household customers, but added a net 172,000 broadband customers, both tallies amounted to the best second quarter performances since 2008. Households subscribing to triple play packages rose a net of 233,000, the best second performance ever.
“We achieved record Q2 subscriber results across nearly every category, setting us up for accelerating financial performance as we look forward," said Time Warner Cable Chairman and CEO Rob Marcus in a statement accompanying the earnings release. "We intend to use the time between the signing and closing of the Charter deal to further strengthen our operations.”
Shares were down 1.6% in pre-market trading after closing up 0.1% on Wednesday to $189.43. TWC shares have risen more than 19% over the last three months.
The current price remains below the estimated value of Charter's offer of an estimated $196 per share; shareholders would get $100 and 0.5409 Charter shares for each TWC share. "As a result, the value ultimately received can fluctuate with the Charter share price," said Edward Jones communications analyst Dave Heger, who rated TWC shares a "hold" in a recent note to investors. "We believe that the combined companies can add to shareholder value due to potential cost savings. The deal does, however, face some risk in gaining regulatory approval."
TWC is adapting to the challenging pay-TV market, he said. "Like many of its cable-TV peers, Time Warner Cable is struggling with declining video subscriber levels due to competitive pressure from telecom companies, satellite-TV, and video content over the Internet. To retain existing subscribers and attract new subscribers, TWC has been aggressively making its programming available on any device, including PCs, smartphones, tablet computers and game consoles."
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