NEW YORK (TheStreet) -- America's largest pay-TV operator wants to be your one and only and it's willing to absorb the second-largest to do so.
Citing sources, Reuters reports Comcast Corp (CMCSA - Get Report) is weighing up a potential full takeover bid for Time Warner Cable (TWC - Get Report), an acquisition which would create an industry behemoth.
A full takeover is but one of three potential scenarios in consideration. The Philadelphia-based broadcasting giant is also determining whether to partner with an additional cable company to take over Time Warner or, in a less aggressive move, whether to simply pick and choose certain Time Warner Cable markets.
Time Warner Cable has been the subject of many takeover rumors of late and the latest puts a rumored offer from Charter Communications (CHTR - Get Report) in jeopardy. Last week, Bloomberg reported the fourth-largest cable provider was preparing its own bid for Time Warner Cable and was seeking as much as $25 billion in loans to do so. Time Warner Cable is significantly larger than the Stamford, Conn.-based business, with a market share of $37.9 billion dwarfing Charter's $13 billion.
The source noted any Comcast offer would occur after Charter has made its move. Reuters reports an offer letter of no more than $135 a share could be sent as early as this week. However, a source at Time Warner said no bid less than $150 a share would be a serious contender.
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At the time of publishing, neither Comcast nor Time Warner Cable had immediately responded to requests for comment.
By mid-morning, Comcast was off 0.2% to $49.15, Time Warner Cable edged 0.4% higher to $132.64 and Charter had dropped 0.9% to $130.21.
TheStreet Ratings team rates Comcast Corp as a Buy with a ratings score of A+. The team has this to say about their recommendation:
"We rate Comcast Corp (CMCSA) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its solid stock price performance, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Compared to its closing price of one year ago, CMCSA's share price has jumped by 30.06%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, CMCSA should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- Net operating cash flow has increased to $3,994 million or 16.64% when compared to the same quarter last year. In addition, Comcast Corp has also modestly surpassed the industry average cash flow growth rate of 13.61%.
- Comcast Corp's earnings per share declined by 16.7% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, Comcast Corp increased its bottom line by earning $2.29 a share vs. $1.51 a share in the prior year. This year, the market expects an improvement in earnings ($5.01 vs. $2.29).
- The debt-to-equity ratio is somewhat low, currently at 0.94, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Despite the fact that CMCSA's debt-to-equity ratio is low, the quick ratio, which is currently 0.60, displays a potential problem in covering short-term cash needs.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Media industry and the overall market on the basis of return on equity, Comcast Corp has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- You can view the full analysis from the report here: CMCSA Ratings Report