February 01, 2013 at 09:21 AM EST
Wells Fargo Downgrades Time Warner Cable to “Market Perform” on Weak 2013 Guidance (TWC)

On Friday analysts at Wells Fargo downgraded cable operator Time Warner Cable Inc (TWC) and cut its valuation after the company gave a weak 2013 outlook in its earning report on Thursday.

The analysts downgraded TWC from “Outperform” to “Market Perform.” The firm also lowered it valuation range on Time Warner Cable from $110-$115 to $90-$95. This new price target range suggest a slight upside to Thursday’s closing price of $89.34.

A Wells Fargo analyst commented, “We reduce ests and are downgrading to Market Perform. While Q4 results and the dividend increase were within our expectations, the disappointing 2013 guide led to a pretty big reduction to our 2013 ests. When peeling back the onion, we believe the guide was not muddied by L.A. RSNs (as many had feared), but was instead driven by higher programming costs (NFL Network, Pac-12, NFL Redzone, NWSA and an accrual for CBS, which comes later this year) and lower advertising (due to the lack of high-margin political). Both of these items should have been caught by the Street, so we take a lot of the blame. But at this point, we struggle with the lack of near-term catalysts, and our new ests suggest a range of $90-95 (as determined by our 5-year DCF analysis) vs. our prior $110-115. In terms of ests, we are lowering 2013 EPS to $6.56 from $7.04 (management is guiding to $6.33-6.61) and introducing 2014 EPS of $8.06. Based on conversations with investors, we seem to be more bullish on 2014, but would prefer to see how more of 2013 plays out before we become constructive again.”

Time Warner Cable shares were down slightly during pre-market trading on Friday. The stock is up +21.11% over the past year.

The Bottom Line
Shares of Time Warner Cable (TWC) have a dividend yield of 2.91% based on last night’s closing price of $89.34.

Time Warner Cable Inc (TWC) is not recommended at this time, holding a Dividend.com DARS™ Rating of 3.4 out of 5 stars.

Be sure to visit our complete recommended list of the Best Dividend Stocks, as well as a detailed explanation of our ratings system here.

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