Why Charter Communications (CHTR) Stock Is Up Today

NEW YORK (TheStreet) -- Charter Communications (CHTR) shares are up 7.7% to $140 on Monday following the completion of a deal with Comcast (CMCSA) that could net the cable company an extra 3.9 million subscribers.

The terms of the deal hinge on the approval of Comcast's proposed merger with Time Warner Cable (TWC) by U.S. government regulators.

In an effort to make the merger more attractive to FCC regulators, Charter Communications will acquire 1.4 million subscribers from Comcast, making Charter the second biggest cable company in the country with 5.7 million subscribers.

Additionally Comcast will swap 1.6 million subscribers with Charter in an attempt to make both companies more geographically diverse. 

Finally, Comcast will spin off 2.5 million subscribers into an independent, publicly-traded company in which Comcast -- and potentially former Time Warner Cable -- shareholders will hold a 67% stake. Charter Communications shareholders will own the other 33%.

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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, solid stock price performance and impressive record of earnings per share growth. 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.
  • Powered by its strong earnings growth of 185.36% and other important driving factors, this stock has surged by 26.62% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • 35.06% is the gross profit margin for CHARTER COMMUNICATIONS INC which we consider to be strong. Regardless of CHTR's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, CHTR's net profit margin of 1.81% is significantly lower than the industry average.
  • 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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