Cablevision, TWC Exceed Q2 Expectations

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Two of the top publicly traded MSOs reported better-than-expected second-quarter results last week, but that news for both Time Warner Cable and Cablevision was overshadowed by the latter's plan to spin off its Madison Square Garden unit.

Cablevision said in May that it would consider spinning off MSG, and last week made it official.

Cablevision stock soared on the news — it rose $1.66 per share on July 30, when the deal was announced, closing at $20.59 per share.

Following the spinoff, stockholders would own shares in both Cablevision and the new MSG, including the New York Knicks and New York Rangers professional sports teams, the MSG and MSG Plus regional sports networks, Madison Square Garden and Radio City Music Hall, among a host of other assets.

The deal also is beneficial for Cablevision in that it will remove about $500 million to $700 million of capital expenditures earmarked for the Madison Square Garden arena renovation from the cable company's books. While valuations for MSG range from about $1.5 billion to $1.8 billion, Citigroup analyst Jason Bazinet said that the arena renovation will drag down the stock.

“To be sure, we don't think the Garden will fetch much as a publicly traded security,” Bazinet wrote in a research report. “Our best guess: MSG trades at only $2 per Cablevision share.”

The news overshadowed what was a fairly strong quarter for Cablevision —cable revenue was up 5% to $1.4 billion and adjusted operating cash flow rose 6% to $553 million. The Bethpage, N.Y.-based MSO lost 8,700 basic customers in the period.

Time Warner Cable, which reported its second quarter results on July 29, bested expectations on the basic subscriber front — it lost 57,000 basic customers versus analysts' predictions of losses as high as 105,000 customers.

Revenue for the period rose 4% to $4.5 billion and operating income before depreciation and amortization was up 5% to $1.7 billion.

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