TWC Beats on Bottom Line - Analyst Blog
January 31 2013 - 9:50AM
Zacks
Time Warner Cable
Inc. (TWC) reported fourth-quarter 2012 financial results,
where the bottom line beat the Zacks Consensus Estimate while the
top line missed the same.
Quarterly adjusted (excluding special items) earnings per share of
$1.57 beat the Zacks Consensus Estimate of $1.56. Quarterly GAAP
net income was $513 million or $1.68 per share against $564 million
or $1.75 per share in the prior-year quarter. At $5,485 million,
quarterly total revenue fell short of the Zacks Consensus Estimate
of $5,500 million, but was up 9.9% year over year.
On an annualized basis total revenue increased 8.7% to $21,386
million while adjusted earnings per share increased 22.6% to $5.75.
The outperformance was mainly attributable to improved advertising
sales, strong high-speed data revenue growth and successful
integration of Insight Communications.
Quarterly adjusted operating income before depreciation and
amortization (OIBDA) climbed 5.6% year over year to $1,994 million.
GAAP operating income grew 13.6% year over year to $1,169 million.
During the fourth quarter of 2012, Time Warner Cable repurchased
6.0 million shares for a total consideration of $571 million and
also paid $171 million in dividends.
During the reported quarter, Time Warner Cable generated $1,410
million of cash from operations compared with $1,344 million in the
prior-year period. Free cash flow in the fourth quarter of 2012 was
$587 million compared with $391 million in the year-ago
quarter.
At the end of the fourth quarter of 2012, Time Warner Cable had
$3,454 million in cash and marketable securities compared with
$5,177 million at the end of 2011. Long term debt at the end of the
reported quarter was $25,171 million against $24,320 million at the
end of 2011. At the end of 2012, debt-to-capitalization ratio was
0.77 compared with 0.76 at the end of 2011.
Residential Services Segment
Quarterly total revenue was $4,577 million, up 6.8% year over year.
Within the segment, video revenue was $2,687 million, up 2.2% year
over year. High-speed data revenue was $1,346 million, up 17.2%
year over year. Voice revenue was $527 million, up 6.5% year over
year. Other revenue was $17 million, up 30.8% year over year.
Business Services Segment
Quarterly revenue was $515 million, up 25.9% year over year. Within
the segment, video revenue was $83 million, up 12.2% year over
year. High-speed data revenue was $245 million, up 25.0% year over
year. Voice revenue was $87 million, up by a substantial 52.6% year
over year. Wholesale transport revenue was $52 million, up 18.2%
year over year. Other revenue was $48 million, up 26.3% year over
year.
Advertising Segment
Advertising revenue surged 29.3% year over year to $313
million.
Other Segment
Other revenue came in at $80 million, up 37.9% year over year.
Subscriber Statistics
At the end of 2012, Residential Video subscribers’ base was 12.030
million. Time Warner Cable lost 129,000 residential video
subscribers in the previous quarter. Commercial Video subscribers’
base was 188,000. Residential High-speed Data subscribers’ base was
10.935 million. Time Warner Cable added 75,000 residential
High-Speed Data subscribers. Commercial High-speed Data
subscribers’ base was 460,000. The company also added 14,000
commercial High-speed Data subscribers. Residential voice
subscribers’ base was 5.024 million. Commercial voice subscribers’
base was 224,000. The company added 12,000 commercial voice
subscribers.
In the fourth quarter, Time Warner Cable gained 36,000 Triple play
subscribers totaling 4.294 million, lost 34000 Double play
subscribers totaling 5.04 million, and also lost 29,000 Single play
subscribers totaling 5.907 million.
Our Take
We believe going forward, Time Warner Cable will benefit from the
launch of popular sports channels in the US market. Of late, sports
entertainment has become a lucrative form to earn revenue for cable
MSOs. Time Warner Cable sold the distribution rights to
DirecTV (DTV) and AT&T Inc.’s
(T) U-Verse, thereby aiding its top-line growth. Additionally, the
second largest cable MSO is also planning to hike its rates on the
back of multiple deals signed with different sporting majors like
Los Angeles Galaxy, Los Angeles Sparks, Los Angeles Lakers and Los
Angeles Dodgers. However, loss of its residential video subscribers
remains the primary cause of concern for Time Warner Cable as
customers are opting for cheaper video streaming service providers
like Netflix Inc. (NFLX) Hulu.Com and You
Tube.
Time Warner Cable currently carries a Zacks Rank #3 (Hold).
DIRECTV (DTV): Free Stock Analysis Report
NETFLIX INC (NFLX): Free Stock Analysis Report
AT&T INC (T): Free Stock Analysis Report
TIME WARNER CAB (TWC): Free Stock Analysis Report
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