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HenryTo
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 Posted: Thu Mar 25, 2010 2:30 pm Post subject: Cable Stocks |
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Morningstar on the state of the cable industry - including competition from traditional phone and wireless companies:
http://news.morningstar.com/articlenet/article.aspx?id=330366
| Quote: | | The competitive landscape for the cable industry improved slightly in 2009, in our opinion. Our recent reports on the industry have focused on three major competitive threats to cable firms: competition from the phone companies, the expansion of wireless data services, and the prospect that alternative video distribution methods shrink demand for traditional television services. Our view is that the first of these threats has subsided a bit, but the second and third have remained stable. However, we think that the stocks have already moved to reflect a more positive outlook for the industry, and none of the stocks we follow in the industry look as attractive on a valuation basis as they did when we last visited the industry. Shares of our long-time favorite Comcast (CMCSA) have moved up a bit, and we also lowered our fair value estimate modestly in the wake of the NBC Universal acquisition announcement last December. Shares of Time Warner Cable (TWC), soon to be the largest pure-play cable operator, have run well beyond the price at which we'd consider buying in recent weeks. We would keep this wide-moat firm on the radar, though, should cable stocks fall back out of favor with investors--which seems to happen with regularity. |
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HenryTo
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Location: Los Angeles, California
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| Posted: Wed May 02, 2012 12:47 pm Post subject: |
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Morningstar on TWX's 1Q earnings.
| Quote: | | At first glance, we view Time Warner's TWX first-quarter results as solid, displaying the steady growth we expect for this high-quality content firm. We plan to increase our fair value estimate after updating our valuation model. The overall television advertising market appears to be maintaining last year's momentum better than we expected. Time Warner is the most undervalued U.S. media stock in our coverage universe. We believe it is well positioned as management continues to embrace the evolution of digital distribution of its sought-after content, and we view its current dividend (yielding about 2.8%) and share repurchases as shareholder-friendly. Overall revenue increased 4% to $7.0 billion, and the operating adjusted operating margin of 19.4% was slightly higher than 19% in the year-ago quarter. Time Warner's cable networks posted sales growth of 3% thanks to affiliate fee and advertising growth of 6% and 5%, respectively, which offset an 18% decline in content sales (tough comparison with Sex and the City syndication sale last year). The advertising growth was a bit stronger than we expected and was driven by higher rates for its NCAA basketbal l games. Film and TV studio sales increased 7% as a result of a stronger movie release slate, higher TV licensing, and better video on demand availability of a TV series. The studio had some one-time write-downs that we view as the nature of the hit-or-miss content business and not a reason for any long-term concern. We think Time Warner has plenty of additional subscription video on demand opportunities from the likes of Netflix NFLX and Amazon AMZN for its programming based on its huge library, which includes more than 6,000 movies and 75,000 TV episodes. |
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HenryTo
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| Posted: Wed May 02, 2012 12:45 pm Post subject: |
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Morningstar on Comcast's 1Q earnings.
| Quote: | | Comcast CMCSA continued to perform at a high level during the first quarter, especially in the cable business. Though the loss of television customers during the quarter is somewhat disappointing following a very solid showing in late 2011, we believe Comcast remains the strongest operator among its peers. Comcast lost 37,000 television customers during the first quarter, a slight improvement versus a year ago. However, since the firm lost only 17,000 customers during the fourth quarter and given the seasonal strength typically seen at the start of each year, there was hope that the TV customer base would return to growth for the first time in five years. While that didn't happen, Comcast's customer losses remain very modest relative to past experience and its cable peers. Management pointed to a small uptick in customer defections resulting from broader price increases taken during the quarter versus a year ago as one factor that hindered television growth. More important, Comcast's Internet access business turned in another stellar quarter. The firm added 439,000 net new Internet customers during the quarter, its best start to a year since 2008. Average revenue per customer also continues to increase on price increases and a shift toward faster speed tiers. The strength of Comcast's customer performance over the past year has caused cable growth to steadily accelerate. Revenue in the segment was up 5.7% year over year during the quarter. Margins in the business were stable despite the usual cost pressure from programming costs and a jump in marketing expenses. NBCU posted a big jump in revenue thank s to ad sales around the Super Bowl, strong film results, and steady growth at cable networks. Profitability was on the weak side, however. Additional NBA games resulting from the league’s lockout and other one-time costs cut into cable network margins. The broadcast segment also continued to post losses as it invests in new content in an effort to stabilize ratings and rebuild momentum behind the NBC network. On a consolidated basis, Comcast generated $3 billion of free cash flow during the quarter, with $2.2 billion from the cable business and the remainder from NBCU. Share repurchases accelerated during the quarter to $750 million, right in line with the pace management outlined for 2012 at the start of the year. Combined with its dividend payout, Comcast returned $1 billion to shareholders, with the remaining $2 billion of cash flow used to repay debt and add to cash on the books. Consolidated net debt dropped to $35.6 billion from $37.7 billion at the end of 2011. Gro ss leverage now sits slightly below the 2.0-2.5 times EBITDA range that management has targeted. |
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HenryTo
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| Posted: Wed Feb 15, 2012 3:54 pm Post subject: |
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Morningstar on Comcast's 4Q earnings.
| Quote: | | Comcast's CMCSA streak of solid performance continued in the fourth quarter. We recently increased our fair value estimate based in large part on the strong results the firm had been posting relative to its peers. We see some additional upside to our fair value estimate if trends present in the fourth quarter persist. The television business was the standout performer for Comcast during the quarter. The firm lost only 17,000 net customers during the period, its best performance in f ive years. For comparison, Comcast shed about 8 times as many customers a year ago and has averaged about 175,000 customer losses per quarter over the previous 10 quarters. Management doesn't believe that the economy has provided much of a lift to this business, citing instead the strength of recent product launches, the success of the Xfinity brand, and the slowdown in network buildouts among the phone companies. We have built continued television customer losses over the longer term into our fair value estimate. We still believe this is appropriate, given the threats to the television business that we see on the horizon. However, the magnitude of the losses we've assumed could prove too high. Looking to the first quarter, which is typically seasonally strong, management declined to support the idea that the fourth-quarter performance implies a return to customer growth in early 2012. |
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rffrydr
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HenryTo
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Posts: 11732
Location: Los Angeles, California
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| Posted: Wed Nov 02, 2011 7:22 pm Post subject: |
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Morningstar on TWX's 3Q earnings:
| Quote: | | Growth at the cable networks and filmed entertainment businesses boosted Time Warner's TWX third-quarter results, and our $41 fair value estimate is unchanged. We think this strong content firm is being undervalued by the market, and our thesis that quality content gets paid for has played out over the past several months. One key example is the licensing deal with Netflix NFLX for CW network content, which we view as a clear win for Time Warner. Overall sales increased 11% from the year-ago quarter, to $7.1 billion, and the operating margin of 22.6% improved from 21.1% in the year-ago quarter. We think our long-term expectations for 3%-4% average sales growth and 21% operating margins are still reasonable for this large media conglomerate. We think Time Warner shares are cheap as they are trading at about 11 times our 2012 earnings per share estimate. We'd get even more enthusiastic if the shares traded down based on the uncertain macro environment and possibility of an advertising slowdown in 2012. We view Time Warner and Disney DIS as our favorite U.S. media stocks as they have relatively lower advertising exposure than its peers and are both trading at attractive low multiples. Time Warner's cable networks posted sales growth of 7% due to affiliate fee and advertising growth of 6% and 9%, respectively. Filmed entertainment revenue increased 19% due mainly to Harry Potter and the Deathly Hallows: Part 2 global box office sales of $1.3 billion. While some investors question what is next after Harry Potter, we have confidence that the studio will continue to generate hit movies. Once again, we are impressed by the company's consistent return of capital to shareholders through share repurchases and dividends. In this calendar year, Time Warner has repurchased 110 million shares (about 9% of shares outstanding) at an average price of $33.60 at a price below our fair value estimate. |
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HenryTo
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HenryTo
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Joined: 06 Aug 2004
Posts: 11732
Location: Los Angeles, California
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| Posted: Wed Aug 03, 2011 12:10 pm Post subject: |
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Morningstar on TWX's 2Q earnings:
| Quote: | | Growth at the cable networks and filmed entertainment businesses boosted Time Warner's TWX second-quarter results, and our $41 fair value estimate is unchanged. We think this strong media content firm is being undervalued by the market; our long-term thesis is that quality content continues to get paid for despite a changing distribution environment. Overall sales increased 10% from the year-ago quarter, to $7 billion, and the operating margin of 18% was just slightly lower than the year-ago quarter due to the timing of prerelease film costs for Harry Potter and the Deathly Hollows: Part 2. Time Warner's cable networks posted sales growth of 9% thanks to affiliate fee and advertising growth of 7% and 11% respectively. The advertising growth was helped by the NCAA tournament games and Turner's international cable networks in the face of audience rating declines for syndicated programming on TBS and TNT. We think the company needs to invest more in original programming for these two networks. Filmed entertainment revenue increased 13% thanks to Harry Potter and the Deathly Hallows: Part 1 video sales as well as the theatrical release of The Hangover Part II. We continued to be pleased with the company?s consistent return of capital to shareholders through share repurchases at a price below our fair value estimate. We will publish a more detailed note following the earnings call. |
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HenryTo
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rffrydr
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| Posted: Sat Jun 25, 2011 9:29 pm Post subject: |
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I've been preaching the staying power of tv (social activity) while missing the obvious trade under my nose, TWC. That Morningstar review in FEB sums it up but, key, is this company is blown out in the biz schools as the great "merger too far." So that's one big primary risk you don't have to worry about anymore. Following from this is a confident buyback program in market bundled into interwebs (which this company is). The "content is king" may be fundamentally flawed but these guys are their own network--and the rebirth of magazines through pads is actually happening as media hoped it would. --And I like this guy:
http://www.businessweek.com/magazine/content/11_19/b4227021650715.htm
Obviously its not the stock I'd chase but maybe it'll get greeked before I'm done. Don't think so though.
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HenryTo
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Location: Los Angeles, California
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| Posted: Wed Feb 16, 2011 9:56 pm Post subject: |
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Morningstar on Comcast's 4Q earnings:
| Quote: | | Comcast's CMCSA fourth quarter, its last without NBC Universal, was solid across the board. Revenue increased 7.2% from a year ago on strength in each of the firm's segments. Customer metrics in the television, Internet access, and phone businesses all improved from versus a year ago, advertising growth again accelerated, and commercial services continued to expand rapidly. The television business was particularly impressive, rebounding following a couple of quarters of weakness. The pace of television customer losses was the slowest for a fourth quarter since 2007. Average revenue per customer also continues to grow nicely in the Internet access business, up nearly 4% from a year ago on rate increases and a mix shift toward higher-speed services. All in all, Comcast's performance continues to support our view of the firm's competitive position. Comcast's margin performance during the fourth quarter was its best of 2010. The operating margin, excluding depreciation and amortization, expanded 0.6 percentage point year over year to 38.2% despite spending to complete the NBC deal, a 25% increase in marketing spending, and continued programming cost pressures. Low tax payments during the quarter spurred a huge jump in free cash flow during the quarter, bringing the total for the year to $5.7 billion, or about $2 per share. Despite continues share repurchases during the quarter, leverage continued to drop. The firm announced a 19% dividend increase for 2011 and plans to accelerate share repurchases. Adjusted for the NBC deal, net debt stands at 2.4 times EBITDA, in line with management's targeted range. That ratio will probably come down during 2011, as the dividend and planned repurchase won't consume all of the firm's cash flow. Comcast plans to manage the cable and NBC balance sheets separately, returning cable cash flow to shareholders and using NBC resources to fund the future General Electric GE buyout. |
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HenryTo
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Location: Los Angeles, California
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| Posted: Thu Feb 03, 2011 2:09 am Post subject: |
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Morningstar on TWC's 4Q earnings:
| Quote: | | Time Warner TWX reported strong fourth-quarter results, and we view its 11% dividend increase and continued share repurchases as shareholder-friendly. Our fair value estimate remains intact. Overall sales of $7.8 billion increased 8% from the year-ago quarter, and the operating margin improved to 18% from 17%. The cable network segment (more than 70% of operating profit) generated sales growth of 14%, which fueled the firm's overall growth and profitability. The higher sales were driven equally by a 9% gain in affiliate fees and 21% advertising growth due to strength in both the U.S. and international markets. Higher domestic rates and the consolidation of HBO Central Europe drove affiliate fee growth, while strong demand in the up-front market boosted ad growth. We also expect Time Warner's cable network peers to report strong ad growth over the next few weeks. Filmed entertainment revenue increased 10% with higher television license fees offsetting lower home video revenue. The television studio, which generates about half of segment profits, continues to be underappreciated given its leading position in supplying TV content to both broadcast and cable networks. We're not surprised that Time Warner increased its dividend by 11% ($0.94 annual dividend), given the firm's commitment to returning capital to shareholders. In addition, the company also repurchased 69 million shares at an average price of $30.50 during 2010. We view the repurchases as shareholder-friendly as the average price is lower than our fair value estimate. |
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HenryTo
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Posts: 11732
Location: Los Angeles, California
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| Posted: Thu Nov 04, 2010 10:51 am Post subject: |
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Morningstar on TWC's 3Q earnings:
| Quote: | | Time Warner Cable TWC reported weak customer growth in its third quarter, with the number of combined television, Internet access, and phone customers declining sequentially for the first time. This performance was significantly worse than that seen at Comcast CMCSA during the quarter. TWC also hasn't seen the same degree of acceleration in revenue per customer that its larger peer has, limiting overall revenue growth. Despite a surge in advertising revenue, total revenue growth slowed to 5.2% year over year. The phone companies, AT&T T in particular, have clearly had an impact on customer growth with aggressive lower-end promotions. As with Comcast, TWC reported that customer growth improved throughout the third quarter and that this trend continued into October. Of note, the firm has added more phone customers thus far in the fourth quarter than it did all of the prior period. Phone customer growth was especially weak at TWC during the third quarter. TWC's operating margin, excluding depreciation and amortization (EBITDA), was up slightly versus a year ago. With capital spending continuing to run below the level of a year ago, free cash flow growth remains solid, up 7% year to date. Cash generation was weaker in the third quarter, but this was primarily the result of changes in working capital. Management telegraphed weaker margins next quarter versus the same period a year ago. One-time items were cited for much of the projected drop, but the firm also expects the growth of programming costs to accelerate, with a full quarter of its recent Disney DIS agreement flowing through. As promised last quarter, TWC addressed its balance sheet, announcing a $4 billion share-repurchase authorization. The firm didn't place a time frame on the repurchase but reiterated that it aims to keep net debt around 3.25 times EBITDA. Given that target, TWC could repurchase as much as $1.7 billion of its shares immediately. We expect the firm will generate enough cash flow in excess of dividend payments to complete the repurchase program around the end of 2011. With the stock trading near our fair value estimate, the repurchase program should be neutral to our estimate. |
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