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Why Charter Communications Stock Jumped 12% in January

By Chris Neiger - Updated Feb 13, 2018 at 3:54PM

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The anticipation of tax reform benefits likely boosted investors' expectations.

What happened

Shares of Charter Communications, Inc. (CHTR 2.56%) rose 12.3% last month, according to data provided by S&P Global Market Intelligence, after news reports started showing higher-than-expected earnings for some large companies because of the recently passed tax reform changes.

So what

While it might seem odd that investors would push up a company's share price due to tax reform, it's likely that they thought Charter Communications might also partake in similar tax benefits that Verizon revealed in mid-January.

A blue stock chart with numbers in the background and yellow line graphs.

Image source: Getty Images.

That expectation was met when Charter reported its fourth-quarter 2017 results at the beginning of this month and its earnings skyrocketed to $9.55 billion in the quarter, up from $454 million a year ago.

As Charter CFO Chris Winfrey said on the earnings call, "[W]e generated $9.6 billion of net income attributable to Charter shareholders in the fourth quarter. $9.3 billion of that is related to a noncash, tax benefit given the reduction in our deferred tax liability as a result of tax reform."

Now what

Charter's shares have been down about 4% since the beginning of the month, but that's likely due to drops in the overall stock market. The S&P 500 has shed more than 5% in February. Even with the benefits of tax reform, Charter Communications and its investors likely have a long road ahead as cord-cutting among consumers continues to rise.

Chris Neiger has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Verizon Communications. The Motley Fool has a disclosure policy.

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