Time Warner Cable Inc. (TWC - Analyst Report) is slated to release its second quarter 2012 results on Thursday, August 2, before the opening bell. The current Zacks Consensus Estimate for the second quarter is pegged at $1.38, representing annualized growth of 16.55%.

With respect to earnings surprises over the trailing four quarters, Time Warner Cable has outperformed the Zacks Consensus Estimate in three out of the last four quarters. The average earnings surprise was positive 5.36%.

First Quarter Recap

On April 26, 2012, Time Warner Cable reported its first quarter 2012 financial results. Quarterly GAAP net income was $382 million or $1.20 per share compared with a net income of $325 million or 93 cents per share in the prior-year quarter. First-quarter 2012 adjusted (excluding special items) EPS of $1.30 easily surpassed the Zacks Consensus Estimate of $1.22.

Total revenue in the quarter increased 6.4% year over year to $5,134 million, surpassing the Zacks Consensus Estimate of $5,121 million. Quarterly adjusted operating income before depreciation and amortization (OIBDA) climbed 8.2% year over year to $1,873 million. GAAP operating income grew 6.9% year over year to $1,042 million.

Agreement of Estimate Revisions

In the last 30 days, out of the 17 analysts covering the stock, one analyst increased the EPS estimate for the second quarter of 2012, but two analysts reduced. However, for the third quarter of fiscal 2012, out of the 15 analysts covering the stock, one analyst raised EPS estimates, while three revised downwards.

For fiscal 2012, in the last 30 days, out of the 20 analysts covering the stock, two moved their estimates upward, while two analysts moved downward. However, for fiscal 2013, in the last 30 days, out of the 20 analysts covering the stock, one analyst moved the estimates upward, while two analysts moved it downwards.

Magnitude of Estimate Revisions

The current Zacks Consensus Estimates for the second quarter of fiscal 2012 has been stable over the last 30 days, at US$1.38. However, the estimates for the third quarter of fiscal 2012 over the last 30 days have changed by a penny to US$ 1.46.

The current Zacks Consensus Estimate for fiscal 2012 and 2013 remained stable over the last 30 days, at US$5.65 and US$6.89, respectively.

Earnings Surprises

The current Zacks Consensus Estimate for the ongoing quarter contains a 0.00% upside potential, while for the upcoming quarter it is reflecting a 4.11% downside risk (essentially a proxy for future earnings surprises). Similarly, for fiscal 2012, the Zacks Consensus Estimate reflects a 0.89% downside risk, while the same for 2013 contains a downside risk of 0.73%.

Our Recommendation

We believe that continuous loss of subscribers coupled with stiff competition from online video streaming companies like Netflix, Inc. (NFLX - Analyst Report) and Hulu will hurt profitability going forward.

Additionally, telecom service providers like Verizon Communication Inc. (VZ - Analyst Report) and AT&T Inc. (T - Analyst Report) are quickly gaining market share from the cable MSO’s, which is believed to be a threat for Time Warner. However, an increase in rates coupled with the continuous deployment of DOCSIS 3.0 technology will drive the commercial segment revenue going forward.

Moreover, acquisition of NaviSite will further drive top-line growth. We thus maintain our long-term Neutral recommendation on Time Warner Cable.

Currently, Time Warner Cable has a Zacks #3 Rank, implying a short-term Hold rating on the stock.