Will Time Warner Cable’s Earnings Finally Grow in 1Q16?



Time Warner Cable’s earnings in 1Q16

Time Warner Cable (TWC) will report its 1Q16 results on April 28, 2016. In this series, we’ll see how these results could turn out. We’ll also look at some of the operational and financial aspects that could affect these results.

Let’s start with Time Warner Cable’s earnings in 1Q16. Wall Street analysts expect that the YoY (year-over-year) declining trend in Time Warner Cable’s earnings will reverse in 1Q16.

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According to the consensus of these analysts, TWC’s adjusted EPS (earnings per share) should increase by ~6.4% YoY in 1Q16. It’s worth noting here that YoY, Time Warner Cable’s earnings on an adjusted level have declined in all the 2015 quarters. In 4Q15 and 3Q15, the company’s adjusted EPS declined YoY by ~11.3% and ~12.9%, respectively.

Consensus versus actual earnings in recent quarters

As we can see in the above bar graph, the company beat analysts’ earnings expectations in 4Q15 and 3Q15. However, in 1Q15 and 2Q15, the cable player’s adjusted EPS negatively surprised these analysts.

Expected slowdown in deterioration of Time Warner Cable’s core margin in 1Q16

Wall Street analysts anticipate that Time Warner Cable’s adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) margin will continue to contract YoY in 1Q16. However, they expect this YoY contraction for 1Q16 to be less than what the company witnessed in 4Q15.

According to Wall Street analysts, Time Warner’s adjusted EBITDA margin should decline from ~34.6% in 1Q15 to ~34.3% in 1Q16. Note that earlier in 4Q15, this metric was ~35.1% compared to ~37% in 4Q14.

For a diversified exposure to some of the largest cable companies in the United States, you may consider the SPDR S&P 500 ETF (SPY). SPY held a total of ~1.2% in Comcast (CMCSA) (CMCSK), Time Warner Cable (TWC), and Cablevision (CVC) at the end of March 2016.


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