Behind Charter’s Big Long-Term Growth Drivers

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Behind Charter’s Big Long-Term Growth Drivers PART 1 OF 7

Why Did Charter’s 2Q17 Earnings Miss Estimates?

Charter’s earnings in 2Q17

Charter Communications (CHTR) reported mixed 2Q17 results, with both its and top and bottom lines falling short of analysts’ average estimates, though its 90,000 video customer losses were far better than expected. The carrier said it gained 231,000 high-speed Internet customers in 2Q17, which helped lift its Internet component sales by ~12.1%.

In 2Q17, the telecom player missed Wall Street analysts’ earnings expectations by ~40.2%. Charter reported EPS (earnings per share) of $0.52 in 2Q17, down from $0.91 in 2Q16 on a pro forma basis.

Why Did Charter’s 2Q17 Earnings Miss Estimates?

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Charter’s net income attributable to its shareholders, on a pro forma basis, declined from $248 million in 2Q16 to $139 million in 2Q17, driven primarily by a pension curtailment gain in 2Q16 and higher D&A (depreciation and amortization) in 2Q17. However, these were partly offset by higher adjusted EBITDA (earnings before interest, tax, depreciation, and amortization).

Charter’s adjusted EBITDA was $3.8 billion in 2Q17, compared with $3.5 billion in 2Q16, on a pro forma basis. Its adjusted EBITDA margin rose to 37.1% in 2Q17 from 35.5% in 2Q16.

Charter faces intense competition

In the cable industry, satellite broadcasters such as DIRECTV and Dish (DISH) pose the greatest current threats to Charter due to increasingly intense competition. In July 2015, AT&T (T) acquired DIRECTV, making it the biggest pay-TV provider in the US.

Meanwhile, Charter has witnessed a reduction in its number of video subscribers due to low-cost OTT (over-the-top) streaming services like those offered by Amazon.com (AMZN) and Netflix (NFLX).

In the next part of this series, we’ll look at Charter’s revenue growth in 2Q17.


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