Charter's Numbers Continue to Improve, but Bigger Questions Remain

With the cable industry off to a tumultuous start in 2014, Charter Communications needs to move quickly to ensure it is not (again) left out of a valuable partnership. Here's where the company stands today.

Feb 24, 2014 at 2:15PM

Charter Communications (NASDAQ:CHTR) is in a tricky position. On one hand, the company has the backing of perhaps the most ambitious mind in the cable industry: Liberty Media's (NASDAQ:LMCA) John Malone. On the flip side, the company was recently left out of its arranged marriage with Time Warner Cable, leaving it looking for a new partner in an increasingly tense cable-industry landscape. Rounding out of the top-five pay-TV providers in the nation includes both satellite TV giants -- DISH Network and DIRECTV -- but neither appears to be a reasonable option for Charter. That means it needs to look further down the ladder to achieve its plans of market share gains via acquisition. Should investors feel hopeful about the future of Charter?

Still truckin'
The M&A front may be a struggle for Charter, but its operating business is actually doing quite well. Adjusted earnings of $0.31 per share came in sharply ahead of the average Wall Street estimate of $0.21 per share. Revenue climbed 12% to $2.15 billion.

With the exception of the voice segment, which saw sales decline a precipitous 17.2%, the cable business is looking strikingly strong amid an industrywide struggle to keep video subscriber and revenues growing (or even stable). Video subscriber sales grew more than 12% while broadband was predictably higher as well.

As Internet streaming businesses have invaded the traditional pay-TV landscape, the cable providers have increasingly relied on broadband growth to soften the blow to their core businesses. While Charter posted higher video revenue, it was due to price hikes and not organic growth. The segment lost 2,000 subscribers in the quarter, while broadband gained 93,000.

Charter generated nearly $600 million in cash flow, with $84 million flowing back to investors in the form of free cash.

The larger question
For now, Charter is doing just fine, but the shifting tides of the cable industry requires Charter to move quickly so that it isn't again, and ultimately, left out in the rain.

The best thing the company has going for it on this front is the backing of Malone's Liberty Media, which owns just over 27% of the company. Without doubt, Malone is working closely with Charter's CEO. Options range from jockeying for the potential 3 million divested subscribers from the Comcast-Time Warner Cable deal to buying the privately held and slightly larger cable company: Cox Communications.

Despite his mercurial public image, John Malone is a deal-making magician and tactician at arranging valuable partnerships. Charter Communications is a big part of his strategy to consolidate today's media industry, and investors can be sure that 2014 will see plenty of action.

Charter isn't the most attractively priced based on its estimated forward earnings (more than 30 times), but it looks better on an EV/EBITDA basis (9.77 times). The company still has plenty of debt to wrangle with (it emerged from bankruptcy in 2009) but seems to generate plenty of cash flow to meet obligations. While not a screaming buy, the company does have compelling factors. Investors interested in the business may look to Liberty Media -- a more diversified, nimble business that will directly benefit from any victories that Charter may find.

More from The Motley Fool 
You know cable's going away. But do you know how to profit? There's $2.2 trillion out there to be had. Currently, cable grabs a big piece of it. That won't last. And when cable falters, three companies are poised to benefit. Click here for their names. Hint: They're not Netflix, Google, and Apple.

Michael Lewis has no position in any stocks mentioned. The Motley Fool recommends DirecTV. The Motley Fool owns shares of Liberty Media.. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers