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Earnings Results: Charter stock rallies after earnings as wireless momentum impresses

Shares of Charter Communications Inc. were headed higher in Friday’s session after the company continued to show a slowdown in its internet business but witnessed faster-than-anticipated expansion of its mobile business.

Charter CHTR, +4.13% benefited during the pandemic as households developed a greater need for reliable internet connections, but the pace of subscriber growth within that business trailed off for much of 2021, including in the fourth quarter. Even as the broadband slowdown was greater than expected, analysts found reason to cheer as Charter showed progress in its wireless business, which represents a new leg of growth for the cable giant.

The company added a net 190,000 broadband subscribers in the fourth quarter, below the 265,000 it added in the third quarter and behind consensus estimates that were for 224,000, according to MoffettNathanson analyst Craig Moffett.

But Charter also picked up a net 380,000 wireless subscribers, marking a new quarterly record for the company and easily exceeding consensus expectations for 284,000 net additions, he continued.

“Up to now, investors have treated cable wireless as something closer to a hobby than a real business,” Moffett wrote, in part because Charter and peer Comcast Corp. CMCSA, +2.57% operate under a mobile virtual network operator (MVNO) model that leverages Verizon Communication Inc.’s VZ, +2.68% network.

Charter’s strong wireless performance in the fourth quarter, however, “will perhaps
go a ways towards changing that perception,” he continued.

While he said that broadband is still “a better business,” Charter’s opportunities in wireless are intriguing because they allow the company to make up for the broadband deceleration with a different business—and one that operates in a larger market than home broadband.

Shares were up 4% in Friday afternoon trading.

Pivotal Research Group analyst Jeff Wlodarczak also highlighted the “nice acceleration in mobile lines” that Charter saw in the fourth quarter. Additionally, he pointed to Charter’s nearly $2.3 billion in free cash flow during the quarter, which came in ahead of his estimate for $1.95 billion.

The cable company posted net income of $1.61 billion, or $8.93 a share, for the quarter, up from $1.25 billion, or $6.05 a share, in the year-prior period. The FactSet consensus was for $7.00 a share in earnings.

Charter also saw adjusted earnings before interest, taxes, depreciation, and amortization of $5.4 billion, up from $5.0 billion a year before. Analysts were looking for $5.3 billion.

Revenue rose to $13.2 billion from $12.6 billion, while analysts tracked by FactSet were modeling $13.3 billion.

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The results come a day after Comcast delivered its own earnings.

Shares have lost 17.3% over the past three months as the S&P 500 SPX, +1.17% has declined 4.9%.

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