Today's Must Read
Subscriber Gain, Wireless Initiatives Benefit Charter (CHTR)
Dominion (D) Gains from Investment, Share Dilution a Concern
Thursday, September 26, 2019
The Zacks Research Daily presents the best research output of our analyst team. Today's Research Daily features new research reports on 16 major stocks, including Netflix (NFLX), Charter Communications (CHTR) and Dominion Energy (D). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Netflix’s shares have underperformed the Zacks Broadcast Radio and Television industry in the past six months (-25.1% vs. -11.9%). The Zacks analyst expects Netflix to benefit from an expanding content portfolio despite increasing competition from the likes of YouTube, HBO, Amazon Prime video, Disney, Apple and Peacock.
The company provided an optimistic third-quarter outlook and believes that the lost shows (Friends and The Office) will free up budget that can be spent on original content. The acquisition of Seinfeld’s streaming rights is a positive in this regard. Meanwhile, estimates have been stable ahead of the company’s third-quarter earnings release. Netflix has a record of positive earnings surprises in recent quarters.
Nevertheless, high streaming content obligation and increased spending are expected to hurt cash flow generation. In fact, a higher cash burn rate in 2019 is a major headwind. Netflix’s shares have underperformed the industry on a year-to-date basis.
Shares of Charter Communications have gained 6.4% in the past three months, outperforming the Zacks Cable TV industry’s rise of 4.9%. The Zacks analyst believes that the company is benefiting from growth in Internet, mobile, commercial and video revenues. Increase in Internet speed at no extra cost is also aiding subscriber growth.
Additionally, Charter is looking to attract video customers by providing a new OTT video service. Moreover, lower capital expenditure, owing to a decline in consumer premises equipment and scalable infrastructure spending, is expected to boost profitability.
However, commercial revenues are expected to suffer due to migration of customers to Spectrum pricing and packaging from Legacy TWC and Legacy Bright House. Moreover, Charter persistently loses video subscribers, primarily due to cord-cutting and intense competition from streaming service providers like Netflix and Amazon.
Dominion Energy’s shares have gained 12.5% year to date, underperforming the Zacks Electric Power industry’s rise of 20.5% over the same period. The Zacks analyst believes that Dominion Energy is benefiting from regulated organic growth projects and acquisition synergies.
Strong long-term capital expenditure plan of $26 billion for expansion of electric transmission and distribution, along with addition of renewable assets, natural gas facilities and midstream assets are the major positives. The company’s merger with SCANA, which proved to be accretive to Dominion’s earnings, will continue to boost long-term performance. Contribution from Southeast Energy and Power Delivery businesses is also leading to strong performance of the company.
However, Dominion Energy’s future earnings may be largely affected by share dilution. Ongoing delay in the Atlantic Coast Pipeline project may impact Dominion Energy’s profitability.
Other noteworthy reports we are featuring today include TOTAL (TOT), Marathon Petroleum (MPC) and Cintas (CTAS).
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Note: Sheraz Mian heads the Zacks Equity Research department and is a well-regarded expert of aggregate earnings. He is frequently quoted in the print and electronic media and publishes the weekly Earnings Trends and Earnings Preview reports. If you want an email notification each time Sheraz publishes a new article, please click here>>>