Why Charter Communication (CHTR) Stock Is Surging Today

NEW YORK (TheStreet) -- Shares of Charter Communications Inc. (CHTR) are up 3.54% to $122. after it was reported that Comcast Corp.  (CMCSA) is in talks with Charter about selling or spinning off some 3 million subscribers worth about $18 billion to $20 billion as part of the divestitures related to its $45.3 billion takeover of Time Warner Cable (TWC), according to Reuters.

The talks revolve around either a straight sale of about 3 million, or the potential creation of a spin-off in which Charter would buy a substantial minority stake, sources told Reuters.

Continuing, sources say that there may be other options they are discussing, and that other cable companies also are interested in Comcast's divested subscribers.

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TheStreet Ratings team rates CHARTER COMMUNICATIONS INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate CHARTER COMMUNICATIONS INC (CHTR) a HOLD. The primary factors that have impacted our rating are mixed some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we find that the company has favored debt over equity in the management of its balance sheet."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • CHTR's revenue growth has slightly outpaced the industry average of 3.9%. Since the same quarter one year prior, revenues rose by 12.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • CHARTER COMMUNICATIONS INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, CHARTER COMMUNICATIONS INC continued to lose money by earning -$1.71 versus -$3.07 in the prior year. This year, the market expects an improvement in earnings ($1.47 versus -$1.71).
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Media industry and the overall market, CHARTER COMMUNICATIONS INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The debt-to-equity ratio is very high at 93.91 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.17, which clearly demonstrates the inability to cover short-term cash needs.
  • You can view the full analysis from the report here: CHTR Ratings Report

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