Charter’s earnings in the second quarter

Charter Communications (CHTR) plans to post its second-quarter earnings results on July 26 before the market bell. Analysts expect Charter’s earnings to rise in the second quarter. They expect its adjusted EPS to reach $1.86 in the quarter compared to $1.15 in the second quarter of 2018. Analysts also expect the company to report adjusted EPS of $7.42 in 2019, $13.12 in 2020, and $19.87 in 2021.

In the first quarter, Charter reported adjusted EPS of $1.11 compared to $0.70 in the first quarter of 2018. Its adjusted EPS missed analysts’ consensus estimate by 21.8% in the first quarter. Its adjusted net income grew significantly, reaching $253 million in the first quarter compared to $168 million in the first quarter of 2018. To learn more, read Charter Communications: Analyzing Its Q1 Earnings.

In comparison, analysts expect Comcast’s (CMCSA) adjusted EPS to rise 15.4% YoY (year-over-year) to $0.75 in the second quarter. They expect Dish Network’s (DISH) adjusted EPS to fall 21.7% YoY to reach $0.65.

What We Can Expect from Charter’s Q2 Results

Charter’s revenue in the second quarter

Analysts expect Charter to report total revenue of $11.4 billion in the second quarter, an increase of 5.0% YoY. Analysts expect Charter’s sales to rise 4.9% YoY to $45.8 billion in 2019, 5.4% YoY to $48.2 billion in 2020, and 4.1% YoY to $50.2 billion in 2021.

In the first quarter, Charter’s revenue rose 5.2% YoY to reach $11.2 billion, $7 million ahead of the Thomson Reuters average consensus revenue expectation. Charter’s commercial services revenue rose 4.3% YoY to $1.6 billion in the first quarter, while its residential services revenue rose 4.2% YoY to $8.9 billion in the quarter. However, the company’s advertising revenue fell 3.1% YoY to $345 million in the quarter. In addition, it reported mobile sales of $140 million.

In comparison, analysts expect Comcast’s revenue to rise 24.9% YoY to $27.1 billion in the second quarter, and they expect Dish Network’s revenue to fall 9.2% YoY to $3.1 billion in the quarter.

What We Can Expect from Charter’s Q2 Results

Charter’s EBITDA growth in the second quarter

In the second quarter, analysts expect Charter Communications to report adjusted EBITDA of $4.2 billion, which would translate to an adjusted EBITDA margin of 36.6%—lower than its margin of 37.3% in the second quarter of 2018. Analysts expect its second-quarter adjusted EBITDA to rise 3.0% YoY from $4.1 billion in the second quarter of 2018.

In the first quarter, Charter’s adjusted EBITDA rose 4.2% YoY to reach $4.1 billion. Excluding mobile, the company’s adjusted EBITDA rose 7.0% YoY in the first quarter of 2019. However, Charter’s adjusted EBITDA margin contracted to 36.2% in the first quarter from 36.5% in the previous year’s quarter.

Charter Communications has managed to grow its adjusted EBITDA despite its higher operating expenses. The company’s total operating expenses rose 5.7% YoY to $7.2 billion in the first quarter due to higher programming as well as non-programming expenses. In the first quarter, Charter’s programming expenses rose 4.1% YoY to $2.9 billion. Its non-programming expenses, on the other hand, rose 6.8% YoY to $4.3 billion.

In comparison, analysts expect Comcast’s adjusted EBITDA to grow 16.8% YoY to $8.7 billion in the second quarter. They expect Dish Network’s adjusted EBITDA to fall 18.0% YoY to $611 million.

Charter’s pay-TV subscriber losses

Analysts expect Charter to report residential pay-TV customer losses in the second quarter, as the company has continued to face intense competition from OTT (over-the-top) offerings such as YouTube TV, Netflix (NFLX), and Amazon Prime Video.

In the first quarter, Charter lost net 152,000 residential pay-TV customers compared to 121,000 net losses in the first quarter of 2018. Charter’s residential pay-TV customer count fell 2.0% YoY to 16.0 million in the quarter. Comcast lost 107,000 net residential video subscribers in the first quarter, whereas Netflix added 9.6 million subscribers worldwide in the quarter.

Charter’s broadband customer additions

Amid falling pay-TV customer numbers, Charter is focusing on its high-speed Internet business. In the first quarter, Charter added 398,000 net residential high-speed Internet customers compared to 334,000 net additions in the first quarter of 2018. Charter’s residential high-speed Internet customer count increased by 5.1% YoY to 24.0 million in the first quarter. The company’s residential broadband revenue rose 8.6% YoY to $4.0 billion in the first quarter.

Analysts expect Charter to report residential broadband customer net additions in the second quarter, as demand is growing for high-speed Internet connections as people are dropping traditional pay-TV plans for OTT offerings.

Shareholder returns and stock trends

Charter has delivered year-to-date stock gains of 42.9% as of July 10. Comcast and Dish Network have risen 28.6% and 62.8%, respectively. On July 10, Charter’s closing price was $407.21 per share. The stock is trading 50.0% above its 52-week low of $271.56 per share and 0.3% below its 52-week high of $408.26 per share.

Charter stock has risen 2.1% in the last five trading days, 3.0% in the trailing one month, and 33.2% in the trailing 12 months. Analysts’ estimates show that the stock could rise 0.8% over the next 12 months.

Currently, Charter has a market cap of $92.3 billion. Meanwhile, Comcast and Dish Network have market caps of $200.1 billion and $19.2 billion, respectively.

Bollinger Band

In the July 10 trading session, Charter Communications stock closed at $407.21, near its upper Bollinger Band level of $405.24. This value suggests that its stock is overbought.

MACD

Charter’s current 14-day MACD (moving average convergence divergence) is 8.44. Comcast’s 14-day MACD is 0.62, and Dish Network’s 14-day MACD is 1.51. A stock’s MACD marks the change between its long- and short-term moving averages. Charter’s positive MACD number indicates an upward trading trend.

Valuation multiple

Currently, Charter Communications is trading at a 12-month forward PE ratio of 37.89x. It’s trading at 54.90x analysts’ 2019 adjusted EPS estimate of $7.42 and 31.03x analysts’ 2020 adjusted EPS estimate of $13.12. The company’s adjusted EPS are expected to rise 42.1% in 2019 and 76.8% in 2020. A company’s PE ratio denotes the amount investors are willing to pay per dollar of its EPS.

Charter Communications is currently trading at a trailing-12-month EV-to-EBITDA (enterprise value-to-EBITDA) multiple of 10.86x. Comcast and Dish Network are trading at trailing-12-month EV-to-EBITDA ratios of 9.91x and 11.79x, respectively. Charter Communications is trading at a 12-month forward EV-to-EBITDA ratio of 9.91x. Comcast’s and Dish Network’s 12-month forward EV-to-EBITDA multiples are 8.55x and 14.49x, respectively.

Short interest ratio

On July 10, Charter Communications’ short interest ratio was 5.79%. The ratio indicates the number of shares sold short and not yet covered back. When a stock’s short interest ratio is above 40%, it indicates that investors and traders expect its price to fall.

Analysts’ recommendations

Most analysts maintain “buys” on Charter Communications stock ahead of its second-quarter earnings results. A total of 66.7% of the 30 analysts covering the stock have given it “buy” ratings, while 30.0% are in favor of “holds,” and 3.3% are in favor of “sells.” On average, analysts have given Charter Communications a 12-month price target of $410.62, which implies a potential upside of 0.8% from its current price of $407.21.

Moving averages

On Thursday, Charter Communications stock closed at $410.25. On the downside, its immediate support level lies near $407.59, while $412.30 could act as an immediate resistance level on a daily basis.

Based on its closing price on Thursday, Charter stock was trading 3.4% above its 20-day moving average of $396.83, 6.2% above its 50-day moving average of $386.45, and 10.9% above its 100-day moving average of $369.78. Comcast was trading 6.5% above its 100-day moving average, while Dish Network was trading 17.3% above its average.

Relative strength index

RSI (relative strength index) is a momentum indicator that consists of values between 0 and 100. Movements of greater than 70 are in the “overbought” zone, while movements of below 30 are in the “oversold” zone. Extreme RSI levels could indicate an imminent reversal in a stock.

On Thursday, Charter’s 14-day RSI score stood at 70. Comcast and Dish Network had 14-day RSI readings of 61 and 71, respectively.

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