Charter Soars After Surprising Growth in TV Subscribers

(Bloomberg) -- Charter Communications Inc. shares hit a record after the cable company posted a surprising gain in TV and internet subscribers due in part to Covid-19 service offers and cheaper video packages.

The second-largest U.S. cable operator swung to a gain of 102,000 residential video subscribers and added 842,000 residential internet customers in the second quarter. Analysts had expected it to lose 129,000 video customers while adding 439,530 new broadband subscribers.

Charter shares rose as much as 5.5% to $594.31 in New York trading Friday. The stock is up more than 16% this year through Thursday.

The gains 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 Walt Disney Co.’s Hulu.

About 90% of the customers Charter added through Covid-19 relief programs have “remained as either paying customers or are still on the free offer,” Chief Financial Officer Chris Winfrey said on a call with analysts. “The vast majority of them are paying, and 50% of them altogether had actually taken additional products.”

Charter’s growth is particularly notable at a time when the competition for viewers has gotten even more heated. Millions of customers have signed up for new offerings, including Disney+, AT&T Inc.’s HBO Max and Comcast Corp.’s Peacock, which made its national debut July 15 and has collected more than 10 million sign-ups since its limited launch in April.

“Though we see risk in 3Q as pledges come off, we believe Charter remains well positioned for continued growth,” Mike McCormack, an analyst at Guggenheim Securities, wrote in a note.

Outpacing Peers

Charter’s subscriber gains also outpaced those of its pay-TV peers. AT&T, which operates DirecTV, said last week it lost 886,000 subscribers in the second quarter. On Thursday, Comcast reported shedding 477,000 TV customers in the period.

Charter, which sells internet, phone and TV service under the Spectrum brand exceeded profit estimates with earnings of $3.63 a share on $11.7 billion in revenue. Analysts expected earnings of $2.46 and $11.6 billion in sales.

The company is still hurting from Covid-19, due to closed businesses and canceled sporting events. The disruption erased about $82 million from Charter’s bottom line and cut about $282 million off total sales, according to the company’s earnings presentation.

Charter boosted spending in the second quarter a bit more than expected. Total capital spending was $1.88 billion, compared with analysts’ prediction of $1.62 billion. The cable shop has spent $3.34 billion on capital investment in the first half of the year and is on pace to finish below the $7.2 billion total last year. Capital spending was $9.1 billion in 2018.

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