What happened

Shares of cable company Altice USA (ATUS -2.20%) soared more than 10% on Friday following Thursday's post-close release of third-quarter sales and earnings that were better than expected.

So what

For the three months ending in September, Altice USA earned $690.6 million in operating income -- or $0.58 per share -- on sales of $2.57 billion. Both were up on a year-over-year basis, by 5.8% and 25.7%, respectively. The crux of today's rally, however, stems from the depth of the earnings beats. Analysts were only modeling profits of $0.52 per share, and revenue of $2.5 billion.

A rising stock chart being plotted by a businessman.

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The bulk of Altice's top-line growth came from its broadband arm's year-over-year revenue improvement of 5.1%, although its struggling cable TV unit still managed to boost its sales by a little more than 1%. None of that growth came from subscriber additions, though. The company shed 13,000 residential high-speed internet subscribers during the quarter in question, and lost 67,000 video customers. Advertising and business services muted the impact of this customer attrition.

Now what

Investors are understandably celebrating the earnings beat, and the fact that even with the headwind that's now blowing against the company's broadband business (in addition to its cable TV operation), Altice USA is still a cash-generating machine. It's still on pace to drive $1.6 billion worth of free cash flow this fiscal year, and continue repurchasing its own stock.

Today's big bounce, however, arguably has more to do with the 56% drubbing the stock suffered between May's high and Thursday's close. Any good news was going to be well received, and prompt bullishness. It remains to be seen if Friday's strength is an actual hint of what's to come. The good news for would-be buyers is, this recent rout leaves shares priced at less than nine times this year's and next year's projected per-share profits.

Even so, Altice USA isn't a great pick for most portfolios. There's still no clear, plausible plan for how the company is going to thrive while the cable business continues to contract, and now that the broadband industry appears to be nearing full saturation.