Cable ONE (CABO) Misses Earnings, Beats Revenue In Q3

Small-sized cable MSO (multi service operator) Cable ONE Inc. (NYSE:CABO) reported mixed financial results in the third quarter of 2016 wherein the top line surpassed the Zacks Consensus Estimate by a nominal margin and the bottom line missed the same.

Cable ONE operates in a highly competitive cable market where it faces intense competition from leading cable multi-service-operators MSOs like Comcast Corp. (NYSE:S) and Charter Communications Inc. (NASDAQ:CHTR) .

Net income was $20.9 million, highlighting an increase of 7.5% from the third quarter of 2015. Third quarter earnings per share of $3.63 lagged the Zacks Consensus Estimate of $4.94.

Total revenue was $205.536 million, up 3.7% year over year and slightly above the Zacks Consensus Estimate of $205 million. Of the total, Residential Data revenues were approximately $86.8 million, up 18.8%. Residential Video revenues totaled $74 million, down 9.1%. Residential Voice revenues were $10.5 million, down 12.3%. Business Services segment generated $25.4 million in revenues, up 13.2%. Advertising sales were $6.5 million, down 11.2%. Other revenues were $2.6 million, up 12.4%.

In the reported quarter, operating expenses totaled $161.7 million, up 1.6% year over year. Operating income was $43.8 million, up 12.4% year over year. Adjusted EBITDA was $87.2 million, up 12.6% year over year, with a net profit margin of 10.2%. Adjusted EBITDA margins have increased more than 300 basis points from 39.1% to 42.4% during the last year, due to revenue growth in residential HSD and Business Services.

Cash Flow

In the third quarter of 2016, Cable ONE generated $68 million of cash from operations, a decrease of 12.3% year over year.

Liquidity

At the end of the third quarter of 2016, Cable ONE had $123.7 million of cash and cash equivalents compared with $119.2 million at the end of 2015.

Operating Statistics

As of Sep 30, 2016, the total customer base of Cable ONE was 658,088, down 1.4% year over year. Non-video customer base was 324,352, up 14.7% year over year. Non-video customers accounted for 49% of the total customer count compared with 42% at the end of the year-ago quarter.

Residential Segment: Total customers were 607,399, down 2.2% year over year. Data customers were 466,668, up 1.9%. Video customers were 315,589, down 13.8%. Voice customer count totaled 100,510, down 12.8%. PSU customers were 882,767, down 6%.

Business Segment: Total customers were 50,689, up 9.6% year over year. Data customers were 43,905, up 12.9%. Video subscribers were 13,797, down 4.9%. Voice customer count totaled 17,695, up 14.1%. PSU customers were 75,397, up 9.4%.

Average Revenue Per User (ARPU): Residential data ARPU was $62.07, up 16.6%. Residential video ARPU was $76.85, up 6.7%. Residential voice ARPU was $34.18, up 1.2%. Business services ARPU was $168.80, up 2.7%. Total customer ARPU was $103.96, up 5.4%.

Zacks Rank and a Key Pick

Cable ONE has a Zacks Rank #3 (Hold).

Meanwhile, here’s a company that has the right combination of elements to post an earnings beat this quarter.

Sprint Corp. (NYSE:S) , with an Earnings ESP of +14.29% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. The company’s earnings surpassed the Zacks Consensus Estimate in three of the previous four quarters.

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