Time Warner Cable Inc. ( TWC - Analyst Report ) reported third-quarter 2012 financial results, where the bottom line met the Zacks Consensus Estimate while the top line missed the same.

Quarterly GAAP net income was $808 million or $2.60 per share against $356 million or $1.08 per share in the prior-year quarter. The outperformance was mainly attributable to improved advertising sales, strong high-speed data revenue growth and increase in other income. However, third-quarter 2012 adjusted (excluding special items) earnings per share of $1.41 came in line with the Zacks Consensus Estimate. Total revenue in the reported quarter increased 9.2% year over year to $5,363 million, missing the Zacks Consensus Estimate of $5,387 million.

Quarterly adjusted operating income before depreciation and amortization (OIBDA) climbed 9.2% year over year to $1,946 million. GAAP operating income grew 9.2% year over year to $1,094 million. During the third quarter of 2012, Time Warner Cable repurchased 5.7 million shares for a total consideration of $500 million. In the reported quarter, the company also paid $173 million in dividends.

During the reported quarter, Time Warner Cable generated $1,195 million of cash from operations compared with $1,264 million in the prior-year period. Free cash flow in the third quarter of 2012 was $423 million compared with $613 million in the year-ago quarter.

At the end of the third quarter of 2012, Time Warner Cable had $3,853 million in cash and marketable securities compared with $5,177 million at the end of 2011. Total debt at the end of the reported quarter was $25,187 million compared with $24,320 million at the end of 2011. At the end of the first nine months of 2012, debt-to-capitalization ratio was 0.77 compared with 0.76 at the end of 2011.

Residential Services Segment

Quarterly total revenue was $4,548 million, up 7% year over year. Within the segment, video revenue was $2,722 million, up 3.7% year over year. High-speed data revenue was $1,279 million, up 14.3% year over year. Voice revenue was $530 million, up 7.3% year over year. Other revenue was $17 million, up 30.8% year over year.

Business Services Segment

Quarterly revenue was $493 million, up 27.4% year over year. Within the segment, video revenue was $83 million, up 13.7% year over year. High-speed data revenue was $235 million, up 25.7% year over year. Voice revenue was $83 million, up by a substantial 59.6% year over year. Wholesale transport revenue was $47 million, up 20.5% year over year. Other revenue was $45 million, up 25% year over year.

Advertising Segment

Advertising revenue surged 22.2% year over year to $264 million.

Other Segment

Other revenue was $58 million, remaining same year over year.

Subscriber Statistics

At the end of the third quarter of 2012, Residential Video subscribers’ base was 12.159 million. Time Warner Cable lost 140,000 residential video subscribers in the previous quarter. Commercial Video subscribers’ base was 185,000. Residential High-speed Data subscribers’ base was 10.860 million. Time Warner Cable added 85,000 residential High-Speed Data subscribers. Commercial High-speed Data subscribers’ base was 446,000. The company also added 13,000 commercial High-speed Data subscribers. Residential voice subscribers’ base was 4.990 million. Commercial voice subscribers’ base was 212,000. The company added 14,000 commercial voice subscribers.

In the previous quarter, Time Warner Cable gained 14,000 Triple play subscribers totaling 4.258 million, lost 29,000 Double play subscribers totaling 5.07 million, and also lost 14,000 Single play subscribers totaling 5.936 million.

Recommendation

After Comcast Corp. ( CMCSA - Analyst Report ) , Time Warner Cable is the second largest cable MSO in the U.S. We reiterate our long-term Neutral recommendation on Time Warner Cable. Currently, the company enjoys a Zacks #2 Rank (Buy) on the stock.