Cablevision Slumps After Profit Trails Estimates on Video-Customer Losses
Cablevision Systems Corp. (CVC), the fifth- largest U.S. cable provider, slumped the most in more than 2 1/2 years in New York trading after reporting profit that missed analysts’ estimates amid subscriber defections.
Net income rose to $87.8 million, or 31 cents a share, the Bethpage, New York-based company said today in a statement. Analysts predicted earnings, excluding some costs, of 40 cents a share, the average of estimates compiled by Bloomberg.
Cablevision competes in about 40 percent of its coverage area with Verizon Communications Inc. (VZ) for television, phone and Internet subscribers, according to John Tinker, an analyst at Maxim Group LLC in New York. Promotions from Verizon in the quarter, including an offer for a free DVR for life, and a weak housing market may have caused more defections from Cablevision.
“Verizon is becoming very aggressive on the promotional side,” Tinker said. “We’re in a tougher economic environment and competition is biting.”
The company lost 23,000 video customers, after gaining 75,900 a year earlier. Jason Bazinet, an analyst at Citigroup Inc., had estimated the number of customers would be little changed. Total customers, including Internet and phone users, fell 17,000 from a year ago, including additions from Bresnan Communications LLC, which Cablevision acquired last year.
Cablevision slid $2.50, or 13 percent, to $17.02 in New York Stock Exchange composite trading at 4:15 p.m., for the biggest drop since Dec. 1, 2008. It had declined 18 percent this year before today.
Broadband subscribers grew by 5,000 in the quarter, missing analysts’ average estimate of 23,000, according to Marci Ryvicker, an analyst at Wells Fargo & Co. in New York.
Cablevision joins other cable providers in reporting subscriber losses amid a sluggish economy and competition from online-video rivals such as Netflix Inc. and Hulu LLC. Time Warner Cable Inc. (TWC) lost 130,000 residential video subscribers in the second quarter and Comcast Corp. (CMCSA) dropped 238,000.
Sales of new U.S. homes unexpectedly declined in June as job growth has slowed. Purchases dropped 1 percent to a 312,000 annual pace, a three-month low, according to Commerce Department statistics last month. The U.S. economy grew at a 1.3 percent pace in April-June following revised growth of 0.4 percent in the first three months of the year that was slower than previously estimated.
“We haven’t seen any uptick in economic activity in the housing market, which does impact our business,” Cablevision Chief Operating Officer Tom Rutledge said on a conference call.
Sales at Cablevision rose 9.1 percent to $1.69 billion. The majority of Cablevision’s cable assets are located around New York, although the Bresnan acquisition added networks in Colorado, Montana, Wyoming and Utah. Net income a year earlier was $60.9 million, or 20 cents a share.
Excluding AMC Networks Inc., which Cablevision spun off June 30, profit from continuing operations was 24 cents, trailing the estimate of Richard Tullo, an analyst at Albert Fried & Co. in New York, by two cents.
“The cable companies aren’t aggressively going after clients because of credit concerns,” said Tullo, who has a “market perform” rating on the shares.
Cablevision repurchased 4.2 million Class A shares in the quarter for $143.9 million. The company won’t pursue any immediate acquisitions, Chief Financial Officer Gregg Seibert said, citing tight credit conditions. Cablevision said it has the capacity to do more share buybacks.
The company also said it’s in “active discussions” with programmers to give customers access to TV shows on mobile devices outside the home. Cablevision has acquired some of the rights and will make content available to customers “in the relatively near future,” Rutledge said.
Unlike many competitors, Cablevision doesn’t offer Time Warner Inc.’s HBO Go application, which allows HBO subscribers to watch programming outside the home. Keith Cocozza, a Time Warner spokesman, wasn’t available to comment.
Cablevision also said it has developed iPod Touch and iPhone applications that allow customers to watch live TV on those devices in the house. Cablevision introduced its iPad application in April.
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