Please ensure Javascript is enabled for purposes of website accessibility

Why Charter Communications, Inc. Stock Fell Friday

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

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

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

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
329%
 
S&P 500 Returns
106%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.