Bear of the Day: Cablevision (CVC)


June 04, 2013 |

The country’s fifth-largest cable operator (by subscribers) is currently going through a challenging time due to increased competition from Verizon’s FiOS internet and television services and online video streaming services by many companies. 

Further, sharp downward estimates revisions have resulted in a cloudy near-term outlook for this Zacks Rank # 5 (Strong Sell) stock.

About the Company

Cablevision Systems Corporation is one of the country's leading media and telecommunications companies. They deliver cable, Internet, and voice offerings throughout the New York area. Additionally, the company owns and operates cable systems in four Western states.

Disappointing First Quarter Results

The company announced its first quarter results on May 9, 2013. The quarter resulted in a loss of 16.1 million, or $0.06 per share, compared with a profit of $57.2 million, or $0.21 a share, in the year-ago quarter. Results were substantially worse than the Zacks consensus estimate of $0.07 per share.

Revenue for the quarter declined 0.8% to $1.52 billion. According to the management, results were hurt by lower advertising revenue and higher corporate costs. AOCF declined 27%, principally due to a significant increase in programming and employee expenses. 

Downwards Revisions

Due to disappointing results and uninspiring guidance, five analysts have revised their quarterly and full-year downwards, in the last 30 days.

Zacks consensus estimate for the current quarter now stands at $0.05 per share versus $0.13 per share, 30 days ago, while the full-year consensus estimate is $0.11 per share now, down from $0.39 per share. The company has delivered negative surprises in the each of the last four quarters, with an average negative surprise of 147.50%.

Union Protests during Annual Meeting

CVC’s annual shareholders meeting on May 23 was disrupted by protestors linked to a union. The management called the police to remove the people who were protesting against the company’s union paypolicies.

The Bottom Line

Strong competition from much cheaper online streaming services provided by Netflix, Hulu and Amazon is adding to challenges faced by cable TV operators.

CVC is currently Zacks Rank # 5 (Strong Sell) stock and it also has a longer-term recommendation of “Underperform”.

Given above reasons, we would advise the investors to stay away from this stock for the time being.

Better Plays

Investors looking for exposure to the cable industry can consider Zon Multimedia (ZONMY) which is a Zacks #2 Rank (Buy) stock or Comcast Corp (CMCSA), which is a Zacks #3 Rank (Hold) stock.

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