Please ensure Javascript is enabled for purposes of website accessibility

What to Expect When Charter Communications Reports Earnings on Feb. 4

By Daniel B. Kline – Feb 2, 2016 at 6:24AM

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

The company is playing the waiting game as it waits for the FCC to decide on its acquisition of Time Warner Cable.

The cable industry has entered an odd sort of stasis.

Charter Communications (CHTR -4.81%) is waiting on a Federal Communications Commission decision on its attempt to buy Time Warner Cable (NYSE: TWC) for about $79 billion, including assumed debt, along with a separate deal to purchase privately held Bright House for $10.4 billion. While the federal agency reviews the deals -- which most analysts expect to be approved, perhaps with some conditions -- effectively nothing new happens.

For Charter, it has been business as usual, with the major caveat that it's most likely about to go from being a relatively small player in cable and broadband to the clear No. 2. If the deals are approved, the company that will become New Charter will be nearly as big as industry leaders Comcast (CMCSA -2.98%) and AT&T(T -2.12%) (which grew massively because of its DirecTV acquisition).

Assuming the FCC says yes, everything is about to change for Charter, and that makes its Q4 results -- due Thursday -- a lot less important than they would be in a normal year. The final quarter of 2015 is essentially a placeholder for a company that most likely won't exist in its current fashion at some point in the first half of 2016.

What to look for
Charter's potential acquisition, Time Warner Cable, reported a very strong fourth quarter, with revenue growing 4.9% while the company added 54,000 cable customers and 281,000 broadband subscribers. Those are very strong numbers that on the pay-TV side buck the industry trend, which has been in a slight decline because of cord cutting.

You can attribute some of those gains to TWC's cleaning up its act and improving its customer service, at least partly to look better while under FCC scrutiny. In some ways, Time Warner Cable has been working toward operating more like its potential acquirer, and its success bodes well for Charter's fourth-quarter numbers.

Charter is coming off a Q3 when it grew revenue by 7.2% while adding 12,000 cable customers and 131,000 broadband users. The company posted $0.48 in earnings per share in Q3, and there is little reason to believe Q4 will be very different. The year-end period was very much a business as usual quarter for the company, where it worked to keep its nose clean while being under the FCC microscope. 

It would be a surprise if Charter reported anything other than a gain in broadband customers in line or even slightly improved over its Q3 numbers and a small gain or decline in cable customers. That would fall in line with broad industry trends where Internet subscriptions have been growing while cable has been in a slight decline.

The waiting is the hardest part
Barring any major surprises, this should be a ho-hum report and earnings call from Charter. Its Q4 really does not affect long-term investors because the company as it exists for the reporting period won't be the one it becomes going forward. Charter isn't Comcast, where a major customer-service scandal could rear its ugly head. It's a generally steady company with a decent (though not great) relationship with its customers.

What you can take out of the company's Q4 results is how it has managed its way through changes to the cable and broadband industries. Its potential acquisition outperformed industry expectations in Q4, especially when it came to cable customers. If Charter can do that or perform as expected -- a slight dip in cable with a gain in broadband -- then it bodes well for New Charter and what lies ahead.

Daniel Kline has no position in any stocks mentioned. He predicts a Panthers blowout, but wants Peyton Manning to win. The Motley Fool has no position in any of the stocks mentioned. 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.

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
Comcast Corporation Stock Quote
Comcast Corporation
CMCSA
$30.89 (-2.98%) $0.95
AT&T Inc. Stock Quote
AT&T Inc.
T
$15.67 (-2.12%) $0.34

*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.