Back to top

Analyst Blog

Charter Communications, Inc. (CHTR - Analyst Report) is scheduled to report second-quarter 2014 financial results before the opening bell on July 31.

Last quarter, the company delivered a huge 333.3% negative earnings surprise. Let’s see how things are shaping up for the company prior to this announcement.

Factors to be Considered this Quarter

The multi-channel video market in the U.S. is almost saturated. Roughly 87% of the total 114 million TV households in the U.S. are multi-channel TV subscribers. Moreover, converting customers from competitors is a difficult task as most pay-TV operators offer innovative packages. Additionally, penetration of digital video customers is almost nearing saturation in the U.S. with 98.2% in 2013 as compared with 96.6% in 2012.

To add to the woes, online video streaming service providers such as Netflix Inc., Hulu.com, YouTube etc. have become a severe threat to cable TV operators. Online videos provide a cheap source of TV programming unless the customer is eager to view real-time programs like sporting events. This business model is gaining momentum, especially under volatile economic conditions.

Earnings Whispers?

Our proven model does not conclusively show that Charter Communications is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESPand a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, this is not the case here as elaborated below.

Zacks ESP: This is because both the Most Accurate estimate and the Zacks Consensus Estimate are poised at 8 cents. This leads to an ESP of 0.00% for Charter Communications.

Zacks Rank: Charter Communications’ has a Zacks Rank #1 which increases the predictive power of ESP. However, when combined with ESP of 0.00%, it makes surprise prediction difficult.

We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing a negative estimate revision momentum.

Other Stocks to Consider

Here are some companies to consider as our model shows these have the right combination of elements to post an earnings beat this quarter.

TIM Participacoes S.A. (TSU - Snapshot Report), with earnings ESP of +16.7% and a Zacks Rank #1.

Time Warner Inc. (TWX - Analyst Report), with earnings ESP of +1.2% and a Zacks Rank #3.

ViaSat Inc. (VSAT - Snapshot Report), with earnings ESP of +375% and a Zacks Rank #3.

Please login to Zacks.com or register to post a comment.