Charter Communications Rises as Revenue Beats Targets

Revenue beats first-quarter analyst targets at cable operator Charter Communications.

Author:: George Mannes
Publish date:: Apr 29, 2002 2:43 PM EDT

Cable TV system operator

Charter Communications

beat first-quarter revenue estimates Monday despite adhering to an industry pattern of decreasing cash flow margins.

Meanwhile, erosion in the company's basic subscriber count, says one analyst, will put pressure on Charter's ability to meet the high end of its reiterated targets for the year.

On Monday afternoon, Charter's shares were trading up 96 cents, or 12%, at $8.64.

For the first quarter ended March 31, Charter reported $1.08 billion in revenue, up 13.1% from pro forma figures in the first quarter of 2001 and ahead of analysts' expectations of $1.07 billion, as tallied by Thomson Financial/First Call. Operating cash flow -- a cable industry financial bottom-line yardstick excluding depreciation, amortization, interest and other noncash charges -- amounted to $449.2 million, up from the pro forma figure of $406.9 million one year earlier.

Including those items excluded from operating cash flow, the company reported a net loss of $174.2 million, or 59 cents per share, for the first quarter of 2002, compared to an as-reported loss of $280.7 million, or $1.20 per share, in the first quarter of 2001.

Charter's operating cash flow margin fell from 42.7% in the year-ago first iquarter to 41.7% n 2002, following a pattern of year-over-year margin squeezes at companies such as

Cox Communications

(COX)

and

AT&T's

(T) - Get Report

AT&T Broadband, according to Ryon Acey, analyst at BB&T Capital Markets. Acey, whose firm hasn't done underwriting for Charter, has a hold rating on the company.

In addition, Acey also points out that Charter will have to overcome a sequential loss of basic subscribers from the fourth quarter of 2001 to the first quarter of 2002 -- a loss the company says is due to the implementation of tougher collection policies. If Charter wants to meet its stated goal of flat year-over-year basic growth, the company will have to get 2.2% subscriber growth over the rest of the year, says Acey.

"I don't know how they're going to put that up, given that they're tightening credit standards," says Acey.