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We expect Time Warner Cable Inc. (TWC - Analyst Report) – the second-largest cable MSO in the U.S. – to beat expectations when it reports third-quarter 2013 results before the market opens on Oct 31, 2013.

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.

Zacks ESP: The Expected Surprise Prediction or Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +1.22%. This is a meaningful and leading indicator of a likely positive earnings surprise.

Zacks Rank: Time Warner Cable currently has a Zacks Rank #3 (Hold). Note that the stocks with Zacks Rank #1, 2 or 3 have a significantly higher chance of beating earnings. The Sell-rated stocks (Zacks Rank #4 and 5) should never be considered going into an earnings announcement.

The combination of Time Warner Cable’s Zacks Rank #3 and +1.22% Earnings ESP makes us confident of a positive earnings beat.

What is Driving the Better-Than-Expected Earnings?

Continuous deployment of the DOCSIS 3.0 technology across its footprints coupled with rate hikes and launch of popular sports channels in the U.S. will drive Time Warner Cable’s top-line growth, while moving ahead. Moreover, deals with different sports majors and different device launches will further act as tailwinds for the company.

On the downside, customers are opting for cheaper video streaming service providers like Netflix, Hulu.Com and YouTube, causing a persistent loss of video subscribers. This remains the primary cause of concern for Time Warner Cable.

Other Stocks to Consider

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

DISH Network (DISH - Analyst Report) with Earnings ESP of +7.14% and a Zacks Rank #3 (Hold).

Liberty Global Inc. (LBTYA - Analyst Report) with Earnings ESP of +26.09% and a Zacks Rank #3 (Hold).

TiVo Inc. (TIVO - Analyst Report) with Earnings ESP of +16.67% and a Zacks Rank #2 (Buy).


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