Time Warner Cable (TWC) Stock Gaining on Speculation of Friendly Deal Talks with Charter

NEW YORK (TheStreet) -- Shares of Time Warner Cable (TWC) are higher by 1.11% to $159 in pre-market trading on Monday morning, as investors keep an eye on the cable company in regards to speculation that Time Warner Cable and Charter Communications (CHTR) will meet this week to discuss a possible merger.

Last year Charter attempted a hostile takeover of Time Warner Cable before Comcast (CMCSA) stepped in with its deal offer. The potential merger between Comcast and Time Warner Cable fell though at the end of last month.

On Sunday the Wall Street Journal reported that John Malone, the chairman of Liberty Broadband Corp.  (LBRDA), Charter's largest shareholder, recently called Time Warner Cable CEO Rob Marcus to express Charter's interests in pursuing friendly merger talks.

Charter is the fourth largest cable operator in the U.S., number two is Time Warner Cable. The two sides are expected to continue to speak this week when Marcus and Charter CEO Tom Rutledge meet at the annual National Cable & Telecommunications Association convention in Chicago, the Journal noted.

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 some important positives, 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, good cash flow from operations, increase in stock price during the past year 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:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 7.3%. Since the same quarter one year prior, revenues slightly increased by 3.5%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • TIME WARNER CABLE INC's earnings per share declined by 6.5% 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, 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 ($8.01 versus $7.17).
  • Net operating cash flow has slightly increased to $1,508.00 million or 7.94% 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 41.37%.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. 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.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Media industry and the overall market, TIME WARNER CABLE INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • You can view the full analysis from the report here: TWC Ratings Report

More from Markets

P&G, GE and IBM Need to Innovate; Has Starbucks' Stock Grown Ice Cold?--ICYMI

P&G, GE and IBM Need to Innovate; Has Starbucks' Stock Grown Ice Cold?--ICYMI

Is Best Buy Sleeping With the Enemy With Amazon Partnership?

Is Best Buy Sleeping With the Enemy With Amazon Partnership?

Sprint, T-Mobile Might Have to Do More Than Make Promises to Get Deal Approved

Sprint, T-Mobile Might Have to Do More Than Make Promises to Get Deal Approved

Video: The S&P 500 Is Failing to Make New Highs

Video: The S&P 500 Is Failing to Make New Highs

Dow, S&P 500 and Nasdaq Finish Lower as Apple, P&G Slump

Dow, S&P 500 and Nasdaq Finish Lower as Apple, P&G Slump