(Bloomberg) – Charter Communications Inc.’s shares hit a record high after the cable company posted a surprising gain in TV and Internet subscribers due in part to Covid-19 service offerings and cheaper video packages.
The second largest cable operator in the US posted a gain of 102,000 residential video subscribers and added 842,000 residential internet clients in the second quarter. Analysts expected it to lose 129,000 video clients while adding 439,530 new broadband subscribers.
Charter shares rose as much as 5.5% to $ 594.31 in New York trading on Friday. The stock rose more than 16% this year through Thursday.
Earnings are a rare bright spot in the pay-TV industry, which has seen steep subscriber declines in recent years as customers turned to popular streaming services like Netflix Inc. and Hulu from Walt Disney Co.
About 90% of the customers Charter added through Covid-19’s help programs “have either remained paying customers or are still on the free offer,” Chief Financial Officer Chris Winfrey said in a call with analysts. “The vast majority of them are paying, and 50% of them in total had taken additional products.”
Charter’s growth is particularly notable at a time when competition for viewers has become even more heated. Millions of customers have signed up for new deals, including Disney +, HBO Max from AT&T Inc. and Peacock from Comcast Corp., which made its national debut on July 15 and has collected more than 10 million subscriptions since its limited launch on April.
“Although we see risks in Q3 as promises are kept, we believe Charter remains well positioned for continued growth,” wrote Mike McCormack, analyst at Guggenheim Securities, in a note.
Outperforming his peers
Charter subscribers’ earnings also outpaced their pay TV peers. AT&T, which operates DirecTV, said last week that it lost 886,000 subscribers in the second quarter. On Thursday, Comcast reported losing 477,000 TV customers in the period.
Charter, which sells Internet, telephone and television services under the Spectrum brand, beat earnings estimates with earnings of $ 3.63 a share by $ 11.7 billion in revenue. Analysts had expected earnings of $ 2.46 and $ 11.6 billion in sales.
The company is still suffering from Covid-19, due to closed businesses and canceled sporting events. The disruption erased approximately $ 82 million from Charter’s results and reduced approximately $ 282 million from total sales, according to the company’s earnings presentation.
Charter increased spending in the second quarter a little more than expected. Total capital spending was $ 1.88 billion, compared to analyst prediction of $ 1.62 billion. The cable store spent $ 3.34 billion on capital investment in the first half of the year and is on track to finish below the total of $ 7.2 billion last year. Capital spending was $ 9.1 billion in 2018.
(Updates with CFO comment in fifth paragraph).
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