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Why Charter Communications, Inc. Stock Fell Friday

By Daniel Sparks – Apr 27, 2018 at 2:05PM

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Charter's top and bottom lines were solid. But here's where the cable company slipped up.

What happened

Shares of cable services company Charter Communications (CHTR -4.81%) were slammed on Friday, falling as much as 16.1%. At the time of this writing, the stock is down about 12%.

Though Charter's revenue and earnings per share were both ahead of consensus analyst estimates for the period, investors may be skittish due to Charter's decline in residential video customers, which fell by 122,000 in the first quarter of 2018.

A chalkboard sketch of a chart showing a stock price moving lower

Image source: Getty Images.

So what

For its first quarter, Charter reported revenue of $10.7 billion, up 4.9% year over year (an acceleration compared to 3.2% year-over-year revenue growth in the fourth quarter of 2017). This increase was driven by growth in "Internet, video, commercial and advertising revenues," management said. Internet revenue was particularly strong, rising 9.1% year over year. On average, analysts were expecting revenue of $10.62 billion. 

Earnings per share for the period came in at $0.70, up from $0.57 in the year-ago quarter and above a consensus analyst estimate for earnings per share of $0.55.

Charter's decrease of 122,000 residential video customers was a steeper decline compared to the 100,000 residential video subscribers Charter lost in the year-ago quarter.

Now what

Though Charter's accelerated financial growth is encouraging, investors should keep an eye on the company's declining residential video subscribers. If the Charter can't stabilize -- and hopefully reverse -- its declining residential video subscriber trend, there could be fundamental problems to Charter's video business that may eventually drag on  Charter's overall business.

In addition, investors should keep an eye on the ongoing integration of the Time Warner Cable business, which management said in its first-quarter earnings release "remains on track."

Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Charter Communications, Inc. Stock Quote
Charter Communications, Inc.
$306.20 (-4.81%) $-15.46

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