Charter Communications Up to Strong Buy on Comcast Deal

On July 12, Zacks Investment Research upgraded Charter Communications, Inc. CHTR to a Zacks Rank #1 (Strong Buy). This leading American cable multi service operator MSO has witnessed positive earnings estimate revisions in the last 30 days propelled by a bullish subscriber growth forecast.

Why the Upgrade?

Over the last 30 days, Charter Communications has witnessed positive earnings estimate revisions for both the current year and the current quarter, resulting in the Zacks Consensus Estimate moving north by 42.9% to 10 cents per share for full year 2014 and by a whopping 300% to 8 cents for the second quarter.

On April 28, 2014, Charter Communications had entered into a strategic cable TV agreement with leading cable MSO, Comcast Corporation CMCSA. Prior to that, in mid-February, Comcast had signed a deal to buy Time Warner Cable Inc. TWC, a cable MSO company, for $45 billion.

The merged entity of Comcast and Time Warner Cable will have around 33 million pay-TV subscribers. However, to maintain its total share at 30% of the U.S. market and to avoid antitrust restriction, Comcast has decided to trade off around 3.9 million Time Warner Cable video subscribers to Charter Communications.

Following the subscriber takeover, Charter Communication will become the second largest pay-TV operator in the U.S. with around 5.7 million subscribers. We believe this deal will benefit Charter Communications significantly as the company will achieve necessary scale to counter competition in the intensely competitive U.S. pay-TV market.

Moreover, we expect the company to report impressive financial numbers, when it reports its second quarter 2014 results on July 31, 2014. The Most Accurate estimate for the current quarter is currently pegged at 39 cents per share, compared to a Zacks Consensus Estimate of 8 cents per share. This suggests that analysts have of late pulled up their estimates, giving the stock a Zacks Earnings ESP of +387.5% ahead of the earnings announcement.

Other Stocks to Consider

Another well-placed stock that warrants a look in the satellite communication industry is DigitalGlobe, Inc. DGI with a Zacks Rank #1 (Strong Buy).


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COMCAST CORP A CMCSA: Free Stock Analysis Report

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Zacks Investment Research
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