Time Warner Cable’s Value Proposition in the US Cable Space

Will Time Warner Cable’s Earnings Finally Grow in 1Q16?

(Continued from Prior Part)

Time Warner Cable’s scale

In this series, we’ve looked at the expected performance of Time Warner Cable (TWC) in 1Q16. Now let’s look at the company’s value proposition among some of the major cable companies in the United States. As of April 20, 2016, Time Warner Cable is the second-largest US cable player by market capitalization. Its market capitalization was ~$57.3 billion.

Comcast (CMCSA) was the top US cable player in this metric with a market capitalization of ~$149.1 billion. As of the same date, Charter Communications (CHTR) and Cablevision Systems (CVC) had market capitalizations of ~$22.3 billion and ~ $9.3 billion, respectively. The proposed merger among Charter, Time Warner Cable, and Brighthouse Networks is undergoing regulatory approvals.

Time Warner Cable’s enterprise value multiple

Now let’s look at the enterprise value multiple for Time Warner Cable and some select US cable players. Time Warner Cable was trading at a forward EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple of ~8.9x on April 20, 2016.

This multiple was lower than Cablevision’s at ~9.7x. Charter was trading at a comparable EV-EBITDA multiple of ~12.7x as of the same date.

Time Warner Cable’s dividend yield

Let’s look now at the dividend yield for Time Warner Cable and Cablevision. Time Warner’s forward dividend yield was ~1.5% as of April 20, 2016. Cablevision’s was ~1.1%.

Instead of taking a direct exposure to some of the largest cable companies in the United States, you can consider investing in the SPDR S&P 500 ETF (SPY). The ETF held a total of ~1.2% in Comcast (CMCSA), Time Warner Cable (TWC), and Cablevision (CVC) at the end of March 2016.

Browse this series on Market Realist:

• Part 1 - Will Time Warner Cable’s Earnings Finally Grow in 1Q16?

• Part 2 - Can Time Warner Cable’s Revenue Improve in 1Q16?

• Part 3 - Expectations for Time Warner Cable’s High-Speed Data Customers