The Zacks Analyst Blog Highlights: Time Warner Cable, Netflix, Verizon Communication, AT&T and Anadarko Petroleum

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Oct 29, 2012, 09:30 ET

CHICAGO, Oct. 29, 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), Netflix, Inc. (Nasdaq:NFLX), Verizon Communication (NYSE:VZ), AT&T Inc. (NYSE:T) and Anadarko Petroleum Corporation (NYSE:APC).

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Here are highlights from Friday's Analyst Blog:

Earnings Preview: Time Warner Cable

Time Warner Cable Inc. (NYSE:TWC) is slated to release its third-quarter 2012 results on Wednesday, October 31, before the opening bell. The Zacks Consensus Estimate for the quarter is pegged at $1.41, representing growth of 27.03% from the year-ago quarter.

With respect to earnings surprises, Time Warner has outperformed the Zacks Consensus Estimate in three of the last four quarters with an average beat of 6.52%.

First Quarter Recap

On August 2, Time Warner reported its second-quarter 2012 financial results. Quarterly GAAP net income was approximately $452 million or $1.43 per share compared with a net income of $420 million or $1.24 per share in the prior-year quarter. Adjusted earnings per share (excluding special items) of $1.48 in the reported quarter handily beat the Zacks Consensus Estimate of $1.38.

Quarterly net revenue increased 9.3% year over year to $5,404 million, surpassing the Zacks Consensus Estimate of $5,367 million. Quarterly adjusted operating income before depreciation and amortization (OIBDA) climbed 10.3% year over year to $2,011 million. GAAP operating income grew 9.6% year over year to $1,990 million.

Agreement of Estimate Revisions

In the last 30 days, out of the 16 estimates, 5 revised upward while 2 moved in the opposite directions for the third quarter. For the fourth quarter of 2012, out of the 17 estimates, 5 upward revisions were witnessed, while one moved downward over the same timeframe.

For 2012, in the last 30 days, out of the 17 estimates, there were 7 upward revisions while no downward revision was witnessed. For 2013, out of the 21 estimates, 8 were revised upward, while one moved in the opposite direction over the same period.

Magnitude of Estimate Revisions

Over the last 30 days, the current Zacks Consensus Estimate has improved by 2 cents for both third and fourth quarter of 2012. The current Zacks Consensus Estimate improved by 4 cents for 2012 over the last 30 days, while the estimate has improved by 14 cents for 2013 over the same time frame.

Our Recommendation

We believe that continuous loss of subscribers coupled with stiff competition from online video streaming companies like Netflix, Inc. (Nasdaq:NFLX) and Hulu will hurt profitability going forward. Additionally, telecom service providers like Verizon Communication (NYSE:VZ) and AT&T Inc. (NYSE:T) are quickly gaining market from the cable MSO's by offering fibre-based TV, which is believed to be a threat for Time Warner.

However, the company's strategy of rebranding itself as a major broadband service provider for residential customers is expected to generate significant subscriber growth for its broadband segment. Business segment became a major growth driver for Time Warner Cable and continuous deployment of DOCSIS 3.0 technology will drive the commercial segment revenue going forward. Moreover, the acquisition of NaviSite will allow the company to expand its presence in the fast-growing cloud-based service business.

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

Earnings Preview: Anadarko

Anadarko Petroleum Corporation (NYSE:APC), one of the largest independent oil and natural gas exploration and production (E&P) companies of the world, is set to post its third-quarter 2012 financial results after the market bell on October 29, 2012.

Recap, Second Quarter-2012

Anadarko reported adjusted net income per share of 85 cents, beating the Zacks Consensus Estimate of 77 cents per share but falling short of the year-ago earnings of $1.14 per share.

Revenue reported in the said quarter witnessed a 12.2% decline to $3.22 billion from $3.67 million in the prior-ago quarter. Revenue also trailed the Zacks Consensus Estimate of $3.42 billion.

The top-line lag was due to a 45.3% and 23.8% slash in natural gas and natural gas liquid sales from the year-earlier period.

Guidance 2012

Anadarko revised its 2012 sales expectation by 3 million barrels to 261–265 million barrels of oil equivalent ("MMBOE") from the prior range of 258–262 MMBOE. The third quarter sales volume is expected to be in the range of 65-67 MMBOE.

Capital investment target of the company for the third quarter and full year 2012 is expected to be in the range of $1.65–$1.8 billion and $6.6–$6.9 billion, respectively

Zacks Consensus

The Zacks Consensus Estimate for the third quarter 2012 is 76 cents per share, higher than the earnings of 65 cents reported in the comparable year-ago quarter. At present, the Zacks Consensus Estimate for earnings ranges from 61 cents per share to $1.09 per share.

For 2012, the Zacks Consensus Estimate is $3.51 per share, up 3.7% from $3.38 per share registered in the earlier year. The current Zacks Consensus Estimate ranges between $3.03 per share and $4.19 per share.

Estimate Revision Trend

Agreement

We observe significant estimate revisions at this point. For third quarter 2012, among a total of 24 estimates, 3 inched upwards and 7 estimates went up in the last 7 days and 30 days, respectively. Conversely, 1 lone estimate stooped down in the last 7 days and 9 estimates moved south in the past month.

For 2012, out of 22 estimates, 2 and 8 trended up in the last week and month, respectively, whereas 1 and 6 estimates slithered down in the past 7 and 30 days, respectively.

Magnitude

The Zacks Consensus Estimate for the third quarter increased by a penny for the past week. Also, the estimate increased by 2 cents to 76 cents from 74 cents in the last 30 days. For 2012, the consensus estimate notched up by 4 cents to $3.51 from $3.47 and by 2 cents to $3.51 from $3.49 in the past month and week, respectively.

Surprise History

With respect to earnings surprise, the company's performance was strong in three of the last four quarters and missed the estimates in the third quarter of 2011. The earnings surprise in the last four quarters ranged from (1.5%) to 41.7%. The average surprise over the last four quarters remained a positive 15.4%.

Our Recommendation

Anadarko's significant natural gas and oil discoveries in Africa and also monetization of a portion of its stake in the Salt Creek field in Wyoming and the Lucius development project in the Gulf of Mexico will accentuate the future growth prospects of the company. The company's ambitious capital program of $7.0 billion to $7.4 billion for 2012 will also boost exploration goals.

However, we expect generic risks related to unexpected outages or rig accidents, a sluggish US macro environment and commodity price volatilities on a continuous basis will threaten the company's financials.

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