MSO Stocks Rally in Q1


MSO stocks went on a tear in the
first quarter, rising 20.4% in the first three
months of 2011 — nearly double their 10.5%
gains over the same period in 2011.

Acquisition speculation, new management
and plain old-fashioned performance helped
drive the stocks of the publicly traded cable operators
in the period.

West Point, Ga.-based Knology was the
biggest first-quarter gainer, rising 28.2% ($4
per share) from $14.20 to $18.20. In February,
Knology hired financial advisers Credit Suisse
and Bank of America Merrill Lynch to seek
potential suitors for the company. According
to sources familiar with the auction, privateequity
firms including Avista Capital Partners
were said to be the lead bidders. Final bids
were due on April 16, those sources said.

Time Warner Cable (up 28.2%) and Comcast
(up 26.6%) weren’t the subject of deal talk in the
period, but optimism over strong performance
in the fourth quarter — Comcast reduced its
subscriber losses to just 17,000 in the period,
almost 10 times less than the prior year — and
hopes of the same for the first quarter helped
fuel the stocks. Finally, Charter,
which hired former Cablevision
Systems chief operating officer
Tom Rutledge as its CEO in December,
was still riding the positive
momentum of that hire.

“For Knology, it was the
deal, but the main driver for
the whole sector was how well
Comcast did in mitigating subscriber
losses and the waning
fear of cord-cutting,” Miller Tabak
media analyst David Joyce
said. Time Warner Cable and
Comcast also continued to increase
their dividend payouts
and share repurchases, which
helped to cheer investors.

In tandem with announcing
its fourth-quarter results
in February, Comcast increased its annual
dividend by 44%, to 65 cents per share, and
authorized a $6.5 billion stock-repurchase
program, with $3 billion earmarked for purchase
in 2012. Time Warner Cable hiked its
quarterly dividend by 17%, to 56 cents per
share ($2.24 annualized), and authorized a
$4 billion stock-repurchase program.

Although first-quarter results — expected
to be released later this month — could show
some slight seasonal weakness as students disconnect
service for vacation
breaks, Joyce said, they are
at least anticipated to be better
than the prior year.

Satellite stocks — which
saw continued, though
slowed, fourth-quarter subscriber
growth — were relatively
stable, gaining 15.5%
in the first quarter of 2012,
compared to 19.4% in 2011.

Programmers also fared
better in the most recent
first quarter, with stocks as
a whole up about 13% in the
period, ahead of the 9.5%
gain in 2011.

CBS (up 24.9%), Discovery
Communications (up
23.5%) and Madison Square
Garden Inc. (up 19.4%) were
among the top gainers, fueled by improved advertising
metrics and, in the latter’s case, the
ending of the National Basketball Association
lockout. MSG also ended a 48-day carriage dispute
with Time Warner Cable during the quarter,
which helped the stock.

The ending of the lockout — and some extra
NBA games that were added
in the period — should help
channels like MSG, TNT
and ESPN, Joyce said. CBS,
TBS and TNT also benefitted
from a strong ratings
showing from the NCAA
Men’s College Basketball
Championship in March.

“There are still opportunities
for cable programmers
to take share,” Joyce