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We expect Time Warner Cable Inc. (TWC - Analyst Report), the second largest cable MSO (multi service operator) in the U.S., to beat expectations when it reports second-quarter 2013 results on Aug 1, 2013, before the market opens.

Why a Likely Positive Surprise?

Our proven model shows that Time Warner Cable is likely to beat earnings because it has the right combination of two key ingredients.

Positive Zacks ESP: Expected Surprise Prediction or ESP (Read: Zacks Earnings ESP: A Better Method), which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +1.21%. This is a very meaningful and leading indicator of a likely positive earnings surprise.

Zacks #3 Rank (Hold): Time Warner Cable currently has a Zacks Rank #3. Note that stocks with Zacks Ranks of #1(Strong Buy), #2 (Buy) or #3 (Hold) have a significantly higher chance of beating earnings. 

The combination of Time Warner Cable’s Zacks Rank # 3 (Hold) and +1.21% ESP makes us very confident of a positive earnings beat on Aug 1, 2013.

What is Driving the Better-Than-Expected Earnings?

Time Warner Cable completed the rollout of its next-generation DOCSIS 3.0 (Wideband) service, which is offered to residential and business customers. Based on this, Time Warner Cable expects to add significant subscribers, particularly in the high speed broadband segment.  The Business Services segment is another major revenue driver for Time warner Cable and is expected to benefit from the rapid growth in backhaul services.

However, competitive threat from fiber-based TV services of telecom operators, and availability of cheaper substitutes, such as online video streaming services, have imposed mounting pressure on Time Warner Cable. Additionally, rising programming cost remains another concern for Time Warner Cable, which could impact margins.

Other Stocks to Consider

Other companies you may want to consider on the basis of our model which shows that they have the right combination of elements to post an earnings beat this quarter are as follows:

CBS Corporation (CBS - Analyst Report) has Earnings ESP of +1.39% and carries a Zacks Rank #2 (Buy).

Cablevision Systems Corporation (CVC - Analyst Report) currently has Earnings ESP of +40.00% and holds a Zacks Rank #3 (Hold).

Leap Wireless International Inc. has Earnings ESP of +6.06% and carries a Zacks Rank #3 (Hold).

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