Charter Stock Roars Ahead After Upbeat Q4 Earnings Report

Charter Cable — Jeff Roberson/AP/Shutterstock

Shares in Charter Communications, the No. 2 U.S. cable operator, surged more than 14% to finish at $331.05 after the company reported strong fourth quarter results Thursday.

One big reason for investor enthusiasm is a key metric included in the quarterly report: The company expects a hefty $2 billion drop in capital expenditures in 2019.

Charter executives are also optimistic about continued momentum in their integration of systems acquired in two large-scale 2016 deals: Time Warner Cable and Bright House Networks. The company also said it added 113,000 customers to its recently launched Spectrum Mobile service, another nascent growth area.

Net income of $1.29 a share plunged from $34.56 a share in the same quarter a year ago, a decline the company said was due to the one-time benefit in December 2017 of federal tax reform. Wall Street analysts had forecast earnings of $1.50 a share.

Although earnings missed the mark, revenue beat estimates, reaching $11.2 billion. That was a 6% gain from the year-ago period, and ahead of Wall Street’s forecast of $11.1 billion.

While residential and commercial revenue grew in the mid-single-digits, advertising jumped 34%. Another key data point was the addition of 289,000 residential internet customers in the quarter. Even though video subscriptions continue to gradually erode (by 36,000 homes in the quarter), major operators like Charter are staying viable by providing the broadband connections that power streaming.

“We embrace where the marketplace is going,” Charter CEO Tom Rutledge said during a conference call with analysts. “We think there are ways for us to be in the connected video business in a way that provides incremental margins for us, at the same time using the video business to drive our core business, which is connectivity.”