Charter Communications (CHTR) Stock Gaining on Potential Time Warner Cable Deal

NEW YORK (TheStreet) -- Shares of Charter Communications  (CHTR) were gaining, higher by 1.32% to $181 in early market trading Friday, after Federal Communications Commission chairman Tom Wheeler said the agency is not opposed to any and all future cable deals, The Wall Street Journal reports.

Wheeler added that any merger deal would be assessed on its own merits, The Journal noted.

Charter is currently in talks with Time Warner Cable  (TWC) about a takeover bid that is expected to be above $170 per share, according to The Journal.

Last year, Charter bid about $132.50 per share, or $37.3 billion, for Time Warner Cable.

However, Comcast  (CMCSA) swooped in and beat Charter's bid with an all-stock deal worth $158.82 per share, according to Reuters.

Then in April, Comcast gave up on its $45 billion takeover deal of Time Warner Cable after the FCC determined that it would be an anti-competitive deal.

U.S. regulators were concerned that the deal would have given Comcast an unfair advantage in the cable TV and Internet-based services market, Reuters added.

TheStreet's Jim Cramer, Portfolio Manager of the Action Alerts PLUS Charitable Trust Portfolio said he believes the FCC and the Department of Justice got this one wrong, and that they should not have scrapped the deal.

If the acquisition deal is successful, both shares of Time Warner Cable and Charter will likely rise.

St. Louis, Mo.-based Charter Communications provides cable services offering a range of entertainment, information and communications solutions to residential and commercial customers.

It sells its video, Internet and telephone services on a subscription basis, often in a bundle of two or more services.

Separately, 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 and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and disappointing return on equity."

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

  • CHTR's revenue growth has slightly outpaced the industry average of 4.2%. Since the same quarter one year prior, revenues slightly increased by 7.3%. 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.
  • Compared to its closing price of one year ago, CHTR's share price has jumped by 29.84%, exceeding the performance of the broader market during that same time frame. 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.
  • CHARTER COMMUNICATIONS INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Stable earnings per share over the past year indicate the company has sound management over its earnings and share float. However, the consensus estimates suggest that there will be an upward trend in the coming year. During the past fiscal year, CHARTER COMMUNICATIONS INC continued to lose money by earning -$1.70 versus -$1.71 in the prior year. This year, the market expects an improvement in earnings ($1.19 versus -$1.70).
  • The gross profit margin for CHARTER COMMUNICATIONS INC is currently lower than what is desirable, coming in at 33.95%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -3.42% is significantly below that of the industry average.
  • Net operating cash flow has declined marginally to $528.00 million or 8.49% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • You can view the full analysis from the report here: CHTR Ratings Report

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