Stocks & Investing
Stocks and Investing
Stocks and Investing
Thu, December 9, 2010
Wed, December 8, 2010 Time Warner Cable, Verizon Wireless, AT&T, Comcast and Ulta Salon, Cosmetics & Fragrance
CHICAGO--([ BUSINESS WIRE ])--Zacks.com Analyst Blog features: Time Warner Cable Inc. (NYSE: [ TWC ]), Verizon Wireless (NYSE: [ VZ ]), AT&T (NYSE: [ T ]), Comcast Corp. (Nasdaq: [ CMCSA ]) and Ulta Salon, Cosmetics & Fragrance Inc. (Nasdaq: [ ULTA ]).
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Here are highlights from Tuesdaya™s Analyst Blog:
Time Warner Cable Targeting SMB
Time Warner Cable Inc. (NYSE: [ TWC ]), the second largest cable MSO (Multiple System Operator) in the U.S. is targeting small & mid sized business (SMB) market opportunities for future growth. The company has predicted that its revenue from SMB will increase 20% year over year in 2010. Year-to-date, Time Warner Cable generated $809 million of sales from the SMB segment in 2010. We believe the companya™s full year 2010 SMB revenue may reach $1.1 billion.
Cable MSOs are quickly losing market share in their core basic video market to giant telecom carriers, satellite TV service providers, and newly developed online Internet video streaming companies. During the third quarter of 2010, the cable industry as a whole lost almost 741,000 basic video subscribers of which Time Warner Cable alone lost 155,000 subscribers. Besides, the company also lost 46,000 digital video subscribers in the same quarter.
At this juncture, it becomes crucial for Time Warner Cable to successfully diversify into the SMB segment. During 2010, cable MSOs are successfully penetrating this segment taking away businesses from large telecom operators like Verizon Wireless (NYSE: [ VZ ]) and AT&T (NYSE: [ T ]). Various industry researches estimate the SMB segment to provide $30 billion market opportunity. Despite being a late entrant in this segment, Time Warner Cable and Comcast Corp. (Nasdaq: [ CMCSA ]) are quickly gaining a strong foothold in his market.
Time Warner Cable has undertaken a massive "Ethernet Everywhere" strategy and is booting up cloud computing services that involve delivering IP-based Ethernet services over fiber, where the company has already laid its optical cables, and is using high-speed DOCSIS 3.0 technologies over its extensive hybrid fiber/coax plant. With this dual-strategy in place, Time Warner Cable can now offer Ethernet to any business enterprise on its network.
Furthermore, significant growth of mobile data and video traffic resulted in an unexpected future growth catalyst for the cable MSOs in the U.S. Massive demand for smartphones gives way to the need for expanding coverage and infrastructure by wireless carriers. This situation gives cable operators a chance to play a vital role in managing mobile backhaul networks. Currently this market is a $200-million opportunity and Time Warner Cable is expected to get $75 million in 2010.
Various industry sources predicted that total backhaul links for base stations and switching elements are likely to cross 500,000 in the U.S. by 2015. As a result, mobile backhaul network may become a multi-billion dollar market by that time. Emerging 4G WiMAX and LTE networks will also create impressive demand for wireless towers and thereby generate the need for backhaul networks.
Ulta Surpasses Zacks Estimates
Ulta Salon, Cosmetics & Fragrance Inc. (Nasdaq: [ ULTA ]) posted its third-quarter 2010 adjusted earnings of 25 cents per share, which were well ahead of the Zacks Consensus Estimate of 20 cents. Including one-time compensation charges, Ulta Salon recorded a quarterly net income of $14.2 million or 23 cents per share, well above $8.5 million or 14 cents recorded in the year-earlier quarter.
Total revenue in the quarter under review surged 19.4% year over year to $339.2 million. The increase was driven by a rise in comparable store sales, which escalated 12.2% from a hike of 1.5% in the prior-year quarter. Management pointed out that the enhancement was spread across all major categories and generated this marked improvement in results, amid a sluggish economic recovery, based on strategies implemented in 2009, dynamic marketing initiatives and renowned brands.
Inside the Headline Numbers
Gross margin expanded 280 basis points (bps) year over year to 35.1%, mainly on account of cost reductions derived from improved supply chain and leverage in marketing.
Selling, general and administrative expenses, as a percentage of sales, slipped down 30 bps to 26.6%. Accordingly, operating income more than doubled year over year to $24.3 million, while operating margin grew 200 bps to 7.2%.
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