Cablevision Systems Corp. (CVC:US) fell after a $61 million charge to extinguish debt and the defection of video subscribers helped fuel a surprise third-quarter loss.
Cablevision tumbled 6.3 percent to $15.49 at the close in New York, for the biggest one-day loss since May 3. The stock has risen 8.9 percent this year.
Cablevision, which has 3 million customers on the East Coast, has struggled to gain video subscribers as it competes with Verizon Communications Inc. (VZ:US)’s FiOS, which offers service in an area that covers about 50 percent of the Bethpage, New York- based company’s users. Cablevision’s rising capital expenditure has crimped profit as spending on plants and operations jumped 41 percent this year.
“We expect fourth quarter 2012 capital expenditures to be significantly higher than during the comparable 2011 period,” Gregg Seibert, the company’s chief financial officer, said on an analyst conference call today after the results were released.
The company reported a third-quarter loss of $3.8 million from continuing operations, or a loss of 1 cent a share, from a profit of $39.3 million, or 14 cents, a year earlier, according to a statement. That compared to an average analyst estimate for a profit of 16 cents, according to data compiled by Bloomberg.
Total capital expenditure for the nine months through Sept. 30 was $809.2 million, up from $574.5 million a year earlier, according to the statement.
Cablevision lost 10,000 video customers in the period, about 2,000 more that the average estimate of 11 analysts surveyed by Bloomberg.
“It seems Verizon really hasn’t toned down promotions as much as people think,” Todd Mitchell, an analyst with Brean Capital LCC in New York, said in an interview before the earnings report was released. FiOS added 119,000 video subscribers in the quarter.
FiOS lowered rates for new customers after temporarily raising them and has extended the promotional pricing “beyond the introductory periods,” Chief Executive Officer James Dolan said on the conference call.
Cablevision added 28,000 Internet customers, topping the average analyst projection of 22,000. The company also gained 22,000 voice subscribers, in line with estimates. Average revenue per video customer was $154.83, trailing the $155.68 average analyst estimate.
Third-quarter sales rose 1.2 percent to $1.69 billion, matching analysts’ estimates.
While not included in third quarter earnings, Cablevision “will likely incur significant storm-related costs” due to Hurricane Sandy next quarter, Tom Eagan, an analyst with Canaccord Genuity Corp., said in a note to clients before the company released results.
Cablevision has cited about $16 million of costs associated with Hurricane Irene. The company may have to spend more than double that for Sandy, Eagan wrote. Cablevision said Nov. 2 it would credit customers for days when service was affected by the storm. The credits and damage costs may result in a decline of as much as 30 percent in adjusted operating cash flow in the fourth quarter from a year earlier, Eagan wrote.
“We’ve not yet estimated the full financial impact of last week’s storm on our company,” Seibert said on the conference call. “Suffice to say that the impact could be significant.”
Cablevision still has more than 502,000 customers without power, the company said today.
In addition to its customers in New York, New Jersey, Connecticut and parts of Pennsylvania, Cablevision also has about 300,000 subscribers in Colorado, Utah, Montana and Wyoming from its 2010 acquisition of the company now known as Bresnan Broadband Holdings LLC.
Cablevision is exploring a sale of Bresnan after several acquisitions of cable systems have been announced this year at favorable prices compared to the value of publicly traded cable stocks. While the company has received unsolicited interest in the unit, there’s no guarantee a deal will happen, Dolan said on today’s call.
(Cablevision held a conference call at 11 a.m. New York time to discuss the company’s results. To listen, visit http://www.cablevision.com/investor/index.jsp.)
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