Cablevision Earnings Are OK, but Trend Is Not Encouraging

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Cablevision Systems Corp. (NYSE: CVC) reported second-quarter 2015 results before markets opened Friday. The cable TV operator reported diluted earnings per share (EPS) of $0.27 on revenues of $1.65 billion. In the year-ago quarter, Cablevision reported EPS of $0.35 on revenues of $1.63 billion. Second-quarter results also compare to the consensus estimates for EPS of $0.25 on revenues of $1.65 billion.

When Disney sneezed and cut guidance for growth in its cable division’s operating income for the next six months, every other pay-TV provider caught a cold. ESPN, the most valuable cable property based on monthly subscription cost, is not bulletproof. And if ESPN can stumble, no other network is safe either.

Cablevision noted in its earnings report:

Second quarter net revenue growth primarily reflects rate initiatives and continued disciplined pricing strategies, partially offset by fewer customers and lower advertising revenue. Second quarter AOCF [adjusted operating cash flow] reflects higher programming, legal fees, product development and marketing costs, partially offset by the increase in revenue and lower customer service-related costs, as compared to the prior year period.

Essentially the company is losing cable subscribers and charging more to those customers who stick with it. This is one of those things that cannot go on forever and therefore won’t.

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The company did not offer guidance but consensus estimates call for third-quarter EPS of $0.23 on revenues of $1.64 billion. For the full year, analysts are looking for EPS of $0.85 on revenues of $6.51 billion.

CEO James L. Dolan said:

Cablevision continued to perform well in the second quarter, achieving growth in net revenue and revenue per customer. Over the past three years, we have transformed our company through strategic investments that have made our operations more efficient, increased the reliability and performance of our network, and enhanced our products and the customer experience. This has contributed to our largest quarterly gains in both customer relationships and high-speed data customers in more than two years. We will continue to focus on providing superior service and innovative products that will resonate with consumers.

Cablevision lost 16,000 video customers in the second quarter and reported a total of 2.64 million at the end of June. The company added 14,000 high-speed data customers to bring its total subscriber number to 2.78 million.

The company did not buy back any stock during the quarter and has $455 million remaining in its authorized repurchase program.

Cablevision paid its regular $0.15 per share quarterly dividend. The dividend payment has been unchanged since May of 2011.

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The company’s stock was inactive in Friday’s premarket, having closed down about 3.9% on Thursday, at $26.53 in a 52-week range of $16.94 to $28.95. The consensus price target on the shares is $21.74, and the high target is $31.00.

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