The Zacks Analyst Blog Highlights: Time Warner Cable, Comcast, Verizon Communication, AT&T and Qiagen

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May 08, 2012, 09:30 ET

CHICAGO, May 8, 2012 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Time Warner Cable Inc. (NYSE: TWC), Comcast Corporation (Nasdaq: CMCSA), Verizon Communication Inc (NYSE: VZ), AT&T (NYSE: T) and Qiagen (Nasdaq: QGEN).

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Here are highlights from Monday's Analyst Blog:

Earnings Scorecard: Time Warner Cable

Following the first quarter earnings announcement on April 26, most of the analysts covering Time Warner Cable Inc. (NYSE: TWC) have slashed their estimates. The brokers' bearish stance is based on the company's continuous loss of residential video customers.

First Quarter Highlights

On a GAAP basis, quarterly net income was $382 million or $1.20 per share, compared with $325 million or 93 cents in the year-ago quarter. Adjusted EPS came in at $1.30, substantially beating the Zacks Consensus Estimate of $1.22.

Quarterly total revenue of $5,134 million was up 6.4% year over year, and surpassed the Zacks Consensus Estimate of $5,121 million. Operating income before depreciation and amortization (OIBDA) increased 8.2% year over year to $1,873 million.

Agreement of Analysts

Of the 18 analysts covering the stock in the last 7 days, none has revised the estimate upward while one analyst has revised the estimate downward for the second quarter of 2012. For the third quarter of 2012, of the 17 analysts covering the stock, none has revised the estimates upward while only one has revised the estimate downward.

For fiscal 2012, out of the 21 analysts covering the stock in the last 7 days, none has raised the estimate while one analyst lowered it. However, for fiscal 2013, out of the 20 analysts covering the stock, none has raised or lowered the estimates.

Currently, the Zacks Consensus Estimate for the second quarter of fiscal 2012 is $1.39, with a projected annual growth of 17.61%. For the third quarter of fiscal 2012, the Zacks Consensus Estimate of $1.42 indicates an annual gain of 27.87%.

Magnitude of Estimate Revisions

During the last 7 days, the current Zacks Consensus Estimates for the second quarter and third quarter of 2012 has been in line with previous estimates of $1.39 and $1.42 respectively. However, for fiscal 2012, the current Zacks Consensus Estimates was a penny below the prior estimate of $5.64. For fiscal 2013, the current Zacks Consensus Estimates was three cents below the earlier estimate of $6.93.

Earnings Surprises

The company has outdone the Zacks Consensus estimates in three out of four quarters. In the first quarter of 2012, Time Warner Cable outpaced the consensus estimate by 8 cents or 6.56%.

The ongoing quarter of fiscal 2012 contains a 0.72% downside risk (essentially a proxy for future earnings surprises), while estimates for the third quarter of 2012 are in line with the Zacks Consensus. Similarly, fiscal 2012 estimates are in line with the Zacks Consensus, while 2013 reflects a downside risk of 0.44%.

Our Recommendation

We believe that Time Warner cable's significant subscriber growth for broadband and digital phone services, decision to expand its Wi-Fi network and its new strategic move to consolidate its Cable TV business will act as positive catalysts in the long run.

However, a bleak macro economic situation, stiff competition from rival Comcast Corporation (Nasdaq: CMCSA) along with telecom carriers like Verizon Communication Inc (NYSE: VZ) and AT&T (NYSE: T) and saturation of the multi-channel video market in the U.S. may create significant headwinds for the company.

We maintain our long-term Neutral recommendation on Time Warner Cable. Currently, Time Warner Cable has a Zacks #2 Rank, implying a short-term buy rating on the stock.

Qiagen Expands Points of Need

In an attempt to expand its Point of Need diagnostics portfolio, Qiagen (Nasdaq: QGEN) recently acquired Boston-based privately owned company AmniSure International. Through the acquisition, Qiagen will have access to AmniSure's proprietary diagnostic test AmniSure assay, which determines rupture of fetal membranes (ROM), most commonly found in pregnant women.

With roughly 30% of pregnant women undergoing this diagnostic test in the US, the acquisition of AmniSure will help Qiagen to widen its scope in in the growing market of woman health. AmniSure assay will expand Qiagen's portfolio of test, which include the Qiagen's digene HPV Test which has been widely accepted as the "gold standard" in testing for high-risk types of human papillomavirus (HPV), primarily responsible for cervical cancer.

This AmniSure assay earlier received clearance from the US Food and Drug Administration (FDA) for marketing and is reimbursable under most of the US state Medicaid plans.

Although the financial terms of the deal were not disclosed, Qiagen anticipates this acquisition to remain neutral to the company's 2012 adjusted EPS, but accretive roughly by 2 cents in fiscal 2013. Further, Qiagen expects AmniSure to contribute around $12 million and $24 million to the company's sales for the remainder of 2012 and full-year 2013, respectively. However, the company expects to incur transaction-related one-time charges and integration costs of $5 million in 2012.

Viewing the substantial potential of the molecular diagnostic market globally, Qiagen is currently focusing on expanding its diagnostics products offering. The company currently derives around 50% of its total revenue from this segment, which is likely to increase with this acquisition. Qiagen has acquired several companies to expand its product portfolio, the significant ones are Cellestis and Ipsogen in 2011.

We are encouraged by Qiagen's focus on strategic initiatives to drive growth and profitability in the molecular diagnostics market. Its innovative tests in the genomic/esoteric arena, with a focus on the high-margin esoteric testing business, are expected to accelerate the company's sales growth on the back of growing market demand, not only domestic but worldwide.

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