Cable Operators

Charter Stock Up on Earnings Report

Shares Surge As Much As 6% On Strong Q1 5/07/2013 9:02 AM Eastern

Charter Communications stock rose as much as 6% ($6.38 per share) after the mid-market MSO reported better-than-expected, first-quarter results.

Charter shares climbed as high as $111.44 (up 6.1% or $6.38 each) in early trading today, after the cable operator reported a strong rise in revenue (4.9%) and cash flow (2.9%) in the first quarter. The stock calmed down in subsequent trading – it closed at $109.69 on May 7, up 4.4% or $4.66 each.

Analysts were impressed by the results, particularly a 6.8% increase in video revenue in the quarter despite a decline of 24,000 video subscribers. Charter said the revenue increase was due to a 2.9% rate increase implemented during the period, higher expanded basic, digital and advanced services penetration.

Cash flow for the period was up 2.8% to $670 million.

In a research note, ISI Group media analysts Vijay Jayant and David Joyce wrote Charter’s results show “the profitable shift toward bundle sales and longer-term customer relationships is starting to show through.

The analysts pointed to Charter’s 9.8 million total residential customer relationships (up by about 134,000 in the period), driven by a rise in high-speed data and phone customers. Charter added about 99,000 residential high-speed Internet customers in the period, compared to about 141,000 additions in the prior year period. The MSO added 59,000 telephone customers in the period, up from the 31,000 added in the same period last year.

Morgan Stanley media analyst Ben Swinburne wrote in a note to clients Tuesday that increases in triple play penetration (up 60 basis points in the period), a rise in average revenue per customer and stabilizing video customer losses indicate the MSO’s new packaging, pricing and sales methods “are gaining traction with customers.”



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