Cablevision Disappoints Investors in Quarterly Ritual

Cablevision Systems Corp. (CVC) is making a habit of disappointing investors with its earnings results.

The fifth-largest U.S. cable company’s latest earnings sent the stock plunging 9.6 percent yesterday. Cablevision shares have dropped or been unchanged on earnings days for nine straight quarters and 11 out of the past 12 -- a far worse performance than its peers.

How does Cablevision so consistently dash investors’ hopes? One big factor is management’s lack of clarity in communications with shareholders, Jason Armstrong, an analyst at Goldman Sachs Group Inc., said in an interview. While competitors such as Comcast Corp. (CMCSA), Time Warner Cable Inc. (TWC) and DirecTV (DTV) use investor conferences to keep the market informed of developments between quarters, Cablevision doesn’t participate as frequently and reveals less information, he said.

“Analysts and investors will catch on to what other companies say at conferences and reset their estimates,” Armstrong said. “With Cablevision, you don’t have as much of that, so you’re vulnerable to the quarterly surprise.”

Kelly McAndrew, a spokeswoman for Bethpage, New York-based Cablevision, declined to comment on the company’s communication with investors.

Yesterday, it was the magnitude of customer losses after Superstorm Sandy that surprised investors. Cablevision fell $1.48 to $13.99 at the close in New York, the biggest one-day drop since the company released its fourth-quarter earnings exactly one year ago.

Unpredictable Element

In other quarters, sudden shifts in strategy have been the unpredictable element for investors, said Paul Sweeney, an analyst at Bloomberg Industries. Moves such as buying Newsday for about $630 million in 2008 or acquiring Bresnan Communications LLC in 2010 -- only to announce it was selling it after just two years of ownership -- have been difficult to anticipate, Sweeney said.

“You never know what you’re going to get with Cablevision,” Sweeney said in an interview. “You don’t know what you’re going to hear on the conference calls.”

The shares do tend to recover after earnings selloffs. Even after the repeated plunges, Cablevision rose 5.1 percent in 2012.

Cablevision’s quarterly egg-laying streak is unmatched in the U.S. pay-TV industry. Comcast shares have gone up after eight of its past 10 quarterly earnings reports. Time Warner Cable shares have climbed in five of the last 10 quarters.

Chief Executive Officer James Dolan has a better record with Madison Square Garden Co. (MSG), the sports and entertainment company that his family controls. It’s had eight consecutive quarters of gains on earnings days. MSG is led by Chief Executive Officer Hank Ratner.

Customer Losses

In the fourth quarter, Cablevision lost 50,000 video customers, 5,000 high-speed Internet subscribers and 10,000 voice customers -- all of which were worse than analysts had predicted. It was the first time Cablevision had ever reported a quarterly loss of Internet customers.

Cablevision stopped billing some users in areas damaged by Sandy and has been unable to contact them, contributing to the subscriber declines, the company said. It hadn’t signaled publicly before yesterday that it expected so many losses. Cablevision serves about 3 million customers in New York, New Jersey, Connecticut and parts of Pennsylvania.

Cablevision’s recent capital-expenditure increases have also diminished the rate of the company’s share buybacks compared with peers, Armstrong said. Investors have been waiting for spending to decrease, and it hasn’t happened yet, he said.

Straight Shot

Chief Financial Officer Gregg Seibert said yesterday during a conference call that the company won’t buy back any stock in the first quarter of 2013 and capital expenditures will remain “elevated” for the year. Capital spending rose 32 percent last year to $1.08 billion. The company didn’t repurchase shares in the fourth quarter, compared with $67.4 million in buybacks a year earlier.

Cablevision’s close-to-the-vest style stems from its roots as a family-owned company. Dolan, the 57-year-old son of founder Charles Dolan, took the CEO job in 1995. In addition to running Cablevision, he is executive chairman of MSG, which includes overseeing management of the National Basketball Association’s New York Knicks and National Hockey League’s New York Rangers. He’s also the frontman in a band, JD & The Straight Shot.

“You only get to hear from Dolan four times a year,” Sweeney said. “Therefore you’re more apt to get volatility around when he does speak.”

To contact the reporter on this story: Alex Sherman in New York at asherman6@bloomberg.net

To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net

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