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Charter (CHTR) to Report Q2 Earnings: What's in the Cards?

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Charter Communications (CHTR - Free Report) is set to report second-quarter 2020 results on Jul 31.

The Zacks Consensus Estimate for second-quarter 2020 revenues is pegged at $11.61 billion, indicating a 2.3% increase from the year-ago quarter’s reported figure.

Moreover, the consensus mark for earnings has decreased 4.1% to $2.57 over the past 30 days, suggesting growth of 84.9% from the figure reported in the year-ago quarter.

Notably, Charter beat on earnings in two of the trailing four quarters, missing the same in the other two, the average negative surprise being 2.60%.
 

 

Let’s see how things are shaping up prior to this announcement.

Factors to Consider

Charter’s top line in the to-be-reported quarter is expected to have benefited from an increased number of Internet subscribers amid the coronavirus outbreak. Increased media consumption and work-from-home wave are expected to have augured well for this cable giant.

Notably, the company had 25.471 million residential Internet customers, up 2.3% year over year in first quarter. Internet revenues grew 9.5% year over year to $4.41 billion.

The Zacks Consensus Estimate for Residential-Internet revenues is pegged at $4.48 billion, indicating 9.2% growth from the figure reported in the year-ago quarter. The consensus mark for Internet subscribers is pegged at 25.815 million, implying 6.5% year-over-year subscriber growth.

Charter’s expanding mobile subscriber base is also a key catalyst. The consensus mark for second-quarter mobile revenues stands at $259 million, indicating a surge of 64% from the figure reported in the year-ago quarter.

However, Charter persistently suffers video-subscriber attrition, primarily due to cord-cutting and stiff competition from streamers like Netflix, Disney+ and Amazon prime video. Rising job losses due to  coronavirus are expected to have intensified cord-cutting, while subscription dues are also likely to have shot up.

The Zacks Consensus Estimate for Video revenues is pegged at $4.39 billion, suggesting almost no change from the figure reported in the year-ago quarter.

Charter is also participating in the FCC's Keep Americans Connected Pledge, pausing disconnects and collection efforts for residential and SMB customers impacted by coronavirus. Notably, small and medium-sized businesses are the worst hit by coronavirus and Charter’s substantial exposure (roughly 2 million customers) to this cohort is expected to have negatively impacted its top-line growth in the to-be-reported quarter.

Weakness in SMB is also expected to have hurt Charter’s advertising business. The Zacks Consensus Estimate for advertising sales is pegged at $287 million, implying a 27.3% decline from the figure reported in the year-ago quarter and 21.4% fall from the figure reported in the previous quarter.

What Our Model Says

Per the Zacks model, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here.

Charter has an Earnings ESP of -14.96% and a Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

Here are a few companies worth considering as our model shows that these have the right combination of elements to beat on earnings in their upcoming releases:

GoPro (GPRO - Free Report) has an Earnings ESP of +43.66% and is Zacks #2 Ranked. You can see the complete list of today’s Zacks #1 Rank stocks here.

Take Two Interactive Software (TTWO - Free Report) has an Earnings ESP of +12.97% and is #2 Ranked.

Etsy (ETSY - Free Report) has an Earnings ESP of +1.15% and a Zacks Rank #2.

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