Charter slips in higher market after Q2 misses
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Charter Communications (NASDAQ:CHTR) was down 1.7% Friday morning against a broadly higher Communications sector after its second-quarter earnings missed expectations and raised concerns on spending's effects on cash flow and (potentially) buybacks.
Revenue rose fractionally to $13.66B, with Commercial revenue mitigating what ended up as a small decline in residential revenues.
On the residential side, Internet sales rose just over 3% to $5.73B, and mobile service continued strong growth, up 30% to $539M. But Video revenues kept dropping, another 6.6% to $4.19B, and voice service revenues fell 8.3% to $365M.
Small/Medium Business sales ticked up 0.2% to $1.09B and Enterprise sales rose 3.2% to $690M. Meanwhile, advertising revenues slid 16.5% to $384M.
Customer Internet additions were still a strong point, with 70,000 residential net adds vs. a year-ago gain of 17,000. And its virtual mobile network continues to take off, with total residential/SMB mobile lines up by 648,000, to 6.6M as of quarter-end.
The secular decline in cable video continues, though, as the company shed 189,000 residential pay TV customers (better retention than rival Comcast, which dropped 520,000 subs, and better than Charter's year-ago drop of 200,000).
The net adds in broadband and mobile were the most promising part of the report, Wells Fargo analyst Steven Cahall said in reaction. Revenues were "slightly light" but EBITDA was in line with expectations.
And while EBITDA was flat, "we think this is the last quarter CHTR is lapping opex investments, so adjusted EBITDA growth should improve in H2," Cahall said.
Free cash flow of $668M was below Wells Fargo's expected $1.06B, and lower-than-expected share repurchases ($378M vs. Street expectations for $1B) "could be a worry point."

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