In this article, let's take a look at Cablevision Systems Corporation (CVC, Financial), a $7.78 billion market cap company, which is one of the largest U.S. cable multiple system operator, it offers Optimum brand cable, Internet and voice services to about 3 million subscribers in the New York tri-state area.
The company reported higher-than-expected results in the second quarter of 2015. Net income from continuing operations was $75.6 million or $0.27 per share compared with $94.2 million or $0.34 per share in the year ago quarter. EPS outpaced analyst´s estimates of $0.24. Total revenue was at $1,653.4 million beating analyst´s estimates of $1,648 million and up 1.6% year over year. By segments, the cable segment’s revenues were $1,481.1 million, up 1.8% year over year and were divided like this:
- Video revenues totaled $813 million (up 0.9% yoy)
- High-Speed data revenues were $370 million (up 4.5% yoy)
- Voice revenues were $232 million (up 2.2% yoy)
- Advertising revenues were $36 million (down 12.2% yoy)
- Other revenues were $30 million (up 11.1% yoy).
The Lightpath segment’s revenues generated $91 million, up 3.4% year over year and finally other revenues were $91.3 million, down 3.7% year over year.
The growth during Q2 was significant but margins were low. Operating margin at 14.8% was below the 15.7% registered in the same quarter one year before.
Estimated return
At the first half of the year, it had 2.637 million video subscribers, 2.781 million high-speed data subscribers and 2.208 million voice subscribers.
In Q2, Cablevision lost 16,000 video subscribers, 7,000 voice customers but gained 14,000 high-speed data users.
According to Yahoo! (YHOO, Financial) Finance, the estimated one-year target share price is below the actual trading price, so if you buy shares at current market price which is the same, your return from price appreciation would be negative and probably it would be offset by the dividend yield of 2.3%.
In terms of valuation, the stock sells at a trailing P/E of 26.5x, trading at a premium compared to an average of 19.6x for the industry and is close to 1-year high of 28.22. To use another metric, its price-to-sales ratio of 1.08x is below the industry average of 1.45x but is close to 3-year high of 1.18
The stock price has an upward trend in the five-year period. Shares have increased about 30% year to date and it has increased more than 48% in the past 12 months. Further, the company has a pattern of positive EPS growth over the past year.
Final comment
The company focuses on the New York market serving about 3 million customers. An increased population makes competitors more aggressive and the firm has to stay nearly Verizon (VZ, Financial).
Although the PE relative valuation exceeds the industry median the stock has an attractive return.
Hedge fund guru Ken Fisher (Trades, Portfolio) upped his stake by 12.62% to 324,878 shares and Pioneer Investments (Trades, Portfolio) has initiated a new position in the stock with 243,027 shares. On the other hand, bearish attitudes were taken by Mario Gabelli (Trades, Portfolio) and Brian Rogers (Trades, Portfolio).
Disclosure: Omar Venerio holds no position in any stocks mentioned
