Time Warner Cable (TWC) Stock Gains on Takeover Negotiations With Altice

NEW YORK (TheStreet) -- Time Warner Cable (TWC) shares are climbing 3.51% to $163.54 in early market trading on Wednesday as the pay television service provider continues to engage in acquisition talks with France-based Altice SA  (ATC), according to Reuters.

Negotiations between the two companies are still in their early stages and it is possible that no deal is reached, according to Reuters sources. Neither company has commented on the reports.

Altice CEO Patrick Drahi announced earlier today that the company purchased a 70% stake in Suddenlink Communications, the country's seventh largest cable company, for about $9 billion as part of the company's plan to expand its presence in the U.S.

Time Warner Cable, the second largest cable company in America, recently put an end to merger negotiations with rival Comcast (CMCSA), the largest cable company in the country, following signals that the merger would not be approved by U.S. regulators due to antitrust concerns.

Altice shares rose 11.16% to EUR 128.50 in European market trading today.

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, good cash flow from operations, solid stock price performance and notable return on equity. We feel its 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 4.2%. 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 ($7.25 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 average is still marginally south of the industry average growth rate of 15.01%.
  • 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

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