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Why Charter Stock Rose 3.6% on July 31

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Dec. 4 2020, Updated 3:53 p.m. ET

Charter exceeded earnings expectations in Q2 2018

Charter Communications (CHTR) posted second-quarter 2018 results on July 31 before the market opened. The company delivered better-than-expected earnings and revenues. It also exceeded expectations for residential Internet customers and lost fewer-than-expected video subscribers during the quarter. Charter’s upbeat second-quarter results led its stock to rise 3.6% to $304.58 on July 31.

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Earnings growth drivers

While earnings of $1.15 per share topped Wall Street estimates of $0.99 per share by 16.2%, revenue of $10.9 billion exceeded analysts’ estimates of $10.83 billion by 0.2%. Earnings rose significantly on a YoY basis from the year-ago earnings of $0.52 per share. The improved earnings came on the back of increased revenues, higher adjusted EBITDA, share buybacks, offset by higher interest expenses.

Adjusted EBITDA of $4.1 billion grew 5.3% YoY driven by revenue growth of 4.8% offset by operating expense growth of 4.5% YoY. EBITDA margin expanded 20 basis points to 37.3% in Q2 2018. Excluding mobile costs of $33 million in the second quarter, adjusted EBITDA grew 6.2% year-over-year.

However, Charter’s operating costs increased 4.5% YoY to $6.8 billion due to higher programming, marketing, and other expenses incurred during the quarter. Regulatory, connectivity, and produced content expenses also increased 5.1% YoY in the quarter, which dented profit growth.

Peer comparison

In comparison, the US’s biggest cable company, Comcast (CMCSA), reported adjusted earnings of $0.65 per share in the second quarter, topping analysts’ expectations by 8.3% and year-ago earnings by 25%. In the second quarter, Verizon’s (VZ) adjusted earnings of $1.20 per share beat the estimates by 5.3% and increased 25% YoY from the prior-year earnings. The telecom behemoth AT&T (T) generated adjusted earnings of $0.91 in Q2 2018, up 15.2% YoY from the Q2 2017 earnings of $0.79 and up 7.1% from the consensus of $0.85.

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