Will Time Warner Cable (TWC) Stock be Affected by Bright House Acquisition Speculation?

NEW YORK (TheStreet) -- Time Warner Cable (TWC) and Charter Communications (CHTR) are said to have held separate acquisition talks with Bright House Networks, according to a report from the Wall Street Journal.

Bright House is a digital cable TV provider with two million customers and a steady cash flow, the Journal noted, citing sources that said if Charter were to acquire Bright House it could be a stepping stone towards going after Time Warner Cable.

The talks between Bright House, Time Warner Cable, and Charter are said to be in preliminary stages.

Speculation that Charter Communications would make a bid for Time Warner Cable began almost immediately after the Time Warner Cable/Comcast (CMCSA) merger fell through. Last year Charter was looking into a hostile takeover of the cable provider before Comcast made its bid.

If Time Warner Cable were to acquire Bright House not only would it remove an asset that would boost Charter's deal ambitions, it would also make the company more expensive and complex to acquire, the Journal said.

Time Warner Cable stock closed at $155.52 on Thursday afternoon.

Separately, TheStreet Ratings team rates TIME WARNER CABLE INC as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:

"We rate TIME WARNER CABLE INC (TWC) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, good cash flow from operations, expanding profit margins and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."

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

  • Despite its growing revenue, the company underperformed as compared with the industry average of 7.2%. Since the same quarter one year prior, revenues slightly increased by 3.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • TIME WARNER CABLE INC's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, TIME WARNER CABLE INC increased its bottom line by earning $7.17 versus $6.71 in the prior year. This year, the market expects an improvement in earnings ($8.04 versus $7.17).
  • Net operating cash flow has increased to $1,810.00 million or 13.19% when compared to the same quarter last year. Despite an increase in cash flow, TIME WARNER CABLE INC's cash flow growth rate is still lower than the industry average growth rate of 49.26%.
  • 36.96% is the gross profit margin for TIME WARNER CABLE INC which we consider to be strong. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 9.56% trails the industry average.
  • The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • You can view the full analysis from the report here: TWC Ratings Report\

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