Cable, internet, and telephone services provider Charter (NASDAQ:CHTR) met Wall Street’s revenue expectations in Q1 CY2025, but sales were flat year on year at $13.74 billion. Its GAAP profit of $8.42 per share was 0.6% above analysts’ consensus estimates.
Revenue: $13.74 billion vs analyst estimates of $13.68 billion (flat year on year, in line)
EPS (GAAP): $8.42 vs analyst estimates of $8.37 (0.6% beat)
Adjusted EBITDA: $5.76 billion vs analyst estimates of $5.57 billion (42% margin, 3.5% beat)
Operating Margin: 23.6%, in line with the same quarter last year
Free Cash Flow Margin: 11.4%, up from 2.6% in the same quarter last year
Internet Subscribers: 27.98 million, down 2.54 million year on year
Market Capitalization: $47.61 billion
“We continue to execute on our long-held strategy of delivering the best network and products, at the best value, combined with unmatched service,” said Chris Winfrey, President and CEO of Charter.
Operating as Spectrum, Charter (NASDAQ:CHTR) is a leading telecommunications company offering cable television, high-speed internet, and voice services across the United States.
The massive physical footprints of cell phone towers, fiber in the ground, or satellites in space make it challenging for companies in this industry to adjust to shifting consumer habits. Over the last decade-plus, consumers have ‘cut the cord’ to their landlines and traditional cable subscriptions in favor of wireless communications and streaming video. These trends do mean that more households need cell phone plans and high-speed internet. Companies that successfully serve customers can enjoy high retention rates and pricing power since the options for mobile and internet connectivity in any geography are usually limited.
A company’s long-term performance is an indicator of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Unfortunately, Charter’s 3.6% annualized revenue growth over the last five years was sluggish. This was below our standard for the consumer discretionary sector and is a rough starting point for our analysis.
Charter Quarterly Revenue
Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. Charter’s recent performance shows its demand has slowed as its revenue was flat over the last two years.
Charter Year-On-Year Revenue Growth
We can better understand the company’s revenue dynamics by analyzing its number of internet subscribers and video subscribers, which clocked in at 27.98 million and 12.16 million in the latest quarter. Over the last two years, Charter’s internet subscribers averaged 1.2% year-on-year declines while its video subscribers averaged 8.1% year-on-year declines.
Charter Internet Subscribers
This quarter, Charter’s $13.74 billion of revenue was flat year on year and in line with Wall Street’s estimates.
Looking ahead, sell-side analysts expect revenue to remain flat over the next 12 months. This projection doesn’t excite us and implies its newer products and services will not catalyze better top-line performance yet.
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Charter’s operating margin might fluctuated slightly over the last 12 months but has generally stayed the same, averaging 23.7% over the last two years. This profitability was elite for a consumer discretionary business thanks to its efficient cost structure and economies of scale.
Charter Trailing 12-Month Operating Margin (GAAP)
This quarter, Charter generated an operating profit margin of 23.6%, in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.
We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.
Charter’s EPS grew at an astounding 34.1% compounded annual growth rate over the last five years, higher than its 3.6% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
Charter Trailing 12-Month EPS (GAAP)
In Q1, Charter reported EPS at $8.42, up from $7.54 in the same quarter last year. This print was close to analysts’ estimates. Over the next 12 months, Wall Street expects Charter’s full-year EPS of $35.83 to grow 6.3%.
It was encouraging to see Charter beat analysts’ EBITDA and EPS expectations this quarter. There was also a nice year-on-year improvement in operating margin. On the other hand, its number of internet subscribers missed. Zooming out, we think this was a decent quarter featuring some areas of strength but also some blemishes. The stock traded up 3% to $344.99 immediately following the results.
