Time Warner Cable Earnings Fall Short as Comcast Deal Ends

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Time Warner Cable Suffers First-Quarter Profit Miss

Time Warner Cable Inc., whose merger with Comcast Corp. was called off last week, posted first-quarter profit that missed analysts’ estimates because of higher TV programming costs as investors wait for its next move.

First-quarter earnings were $1.65 a share, the New York-based cable company said Thursday, trailing the $1.88 average of estimates compiled by Bloomberg. Although sales also came in short, Time Warner Cable reported its first increase in cable subscribers since 2009 and the highest number of Internet subscribers since 2007. Paul Sweeney, an analyst at Bloomberg Intelligence, said the gains suggested “that operational improvements are successfully underway.”

Investors are focused on what’s next for Time Warner Cable after Comcast dropped its $45.2 billion takeover deal -- which would have combined the two largest cable companies in the U.S. -- in the face of regulatory hurdles. Advisers for Charter Communications Inc., the No. 4 in the industry, have already reached out to Time Warner Cable to begin talks on an acquisition, people with knowledge of the matter have said.

With Time Warner Cable shares now at about $157, Charter would need to pay a lot more than the $132.50-a-share that it offered in its failed attempt to buy Time Warner Cable in January 2014. Analysts’ estimates for a bid range from $150 to $175.

Instead of being bought, Time Warner Cable could also decide to acquire Bright House Networks, the sixth-largest cable provider, whose recent deal with Charter was contingent on the Comcast deal closing.

Time Warner Cable Chief Executive Officer Rob Marcus declined to comment on any potential deals during an earnings call Thursday, saying the company would do “what’s in the best interest of our shareholders.”

Time Warner Cable shares dropped 1.5 percent to $155.52 at the close in New York. The shares were up 3.8 percent this year through Wednesday, while the Standard and Poor’s 500 Index gained 2.3 percent.

First-quarter sales gained 3.5 percent to $5.78 billion, the company said. Analysts projected $5.83 billion.

As the number of Americans paying for TV declines, Time Warner Cable has focused on offering cheaper bundles of cable, Internet and phone service to keep subscribers and lure new ones. It also invested in improving its high-speed Internet network as younger viewers increasingly watch shows on the Web.

The company also faces rising costs for airing football, basketball and other games. Customers this year had a $2.75 monthly charge added to their bills for sports programming.

Content Costs

Programming and content expenses climbed 8.4 percent to $1.42 billion in the quarter, as TV programmers demanded higher fees for the right to air their sports and broadcast channels.

Time Warner Cable gained 30,000 residential cable customers, while adding 320,000 residential voice customers and 315,000 residential high-speed Internet clients.

The company was expected to lose about 4,700 video subscribers, the average of three analysts surveyed by Bloomberg, and gain 188,500 high-speed Internet subscribers.

Time Warner Cable’s net income fell to $458 million, or $1.59 a share, from $479 million, or $1.70, a year earlier. The company said its results were hurt by high pension costs.

The number of U.S. subscribers to cable, satellite or fiber services fell for a second straight year in 2014, by about 176,000, according to research firm SNL Kagan. A year earlier, the drop was 251,000.

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