Brean Capital Reiterates Hold Rating on Time Warner Cable
In a report published Wednesday, Brean Capital reiterated its Hold rating on Time Warner Cable (NYSE: TWC).
Brean Capital noted, “Increasing signs of pressure on capital return story. TWC maintained an aggressive capital return strategy in 2012 and equity holders were rewarded. We think TWC will be hard pressed to maintain comparable levels of capital returns in 2013 given increasing competition for the firm's capital on a variety of fronts. TWC has led with HSD, but underinvested in its video service profile, and its residential business is lagging as a result. We believe TWC will need to play catch up. While unable to articulate a new CPE strategy while litigating with TiVo (TIVO $12.46, Buy), we expect TWC to enter a new CPE spending cycle that will challenge its $3 billion capital expenditure ceiling. TWC has also aggressively pursued broadcast rights for the LA Lakers and Dodgers, tying itself to billions in commitments over a two decade period, and after consolidating Insight in 2012, TWC is now reportedly on the shortlist of bidders for Cablevision's (CVC $15.25, Hold) Optimum West. Potential acquisitions, sports network launches, and rising investment levels are competing for falling FCF. Given that TWC is already close to its target leverage, we believe this is likely to limit capital returns going forward.”
Time Warner Cable closed on Tuesday at $100.35.
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