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Time Warner Cable Inc. (NYSE:TWC) is slated to release its first quarter 2011 results on Thursday, April 28, before the opening bell. The current Zacks Consensus Estimate for the first quarter is pegged at 99 cents, representing an annualized growth of 20.95%.

With respect to earnings surprises over the trailing four quarters, Time Warner Cable has outperformed the Zacks Consensus Estimate in all the three quarters except the last quarter where it failed to beat the Zacks Consensus Estimate by a penny. The average earnings surprise was a positive 5.50%, implying that the company has surpassed the Zacks Consensus Estimate by the same magnitude over the last three quarters.

Fourth Quarter Recap

On January 27, 2011, Time Warner Cable reported its fourth quarter 2010 financial results. Total quarterly revenue spiked 5.9% year over year to $4,801 million and also exceeded the Zacks Consensus Estimate of $4,749 million. This was attributable to an increase in residential subscription revenue, commercial subscription revenue, and advertising revenue.

Quarterly GAAP net income was $392 million or $1.09 per share compared with a net income of $322 million or 91 cents per share in the prior-year quarter. Fourth quarter 2010 adjusted earnings per share (EPS) were 99 cents, slightly below the Zacks Consensus Estimate of $1.00.

Agreement of Estimate Revisions

In the last 30 days, out of the 22 analysts covering the stock, 4 analysts increased their EPS estimates for the first quarter of 2011 while 1 reduced its estimate. For the second quarter of fiscal 2011, out of the 21 analysts covering the stock, 5 analysts increased their EPS estimates but none decreased it.

For fiscal 2011, in the last 30 days, out of the 23 analysts covering the stock, 6 analysts increased their EPS estimates but 1 analyst decreased its estimate. For fiscal 2012, out of the 22 analysts covering the stock, 6 analysts increased their EPS estimates while none reduced it.

Magnitude of Estimate Revisions

During the last 30 days, the Zacks Consensus Estimate was in line with the current estimates of 99 cents for the ongoing quarter of 2011 and $1.14 for the next quarter of 2011. However, for fiscal 2011, the Zacks Consensus Estimate is 2 cents below the current estimates of $4.51. Similarly, for fiscal 2012, the Zacks Consensus Estimate is 5 cents below the current estimates of $4.51.

Earning Surprises

In the previous quarter, Time Warner Cable reported EPS of 99 cents, which was a penny short of the Zacks Consensus Estimate. The current Zacks Consensus Estimate for the ongoing quarter contains a 0.00% upside potential while for the upcoming quarter, it is reflecting a 2.63% upside potential (essentially a proxy for future earning surprises). Similarly, for fiscal 2011, and 2012, the Zacks Consensus Estimate upside potentials are 2.22% and 4.53%, respectively.

Our Recommendation

Solid free cash flow, healthy demand for premium cable services fueled by the improving U.S. economy and strong share buyback program will drive the Company’s top-line and bottom-line growth.

However, stiff competition from formidable rivals like Comcast Corp. (NASDAQ:CMCSA) and AT&T’s (NYSE:T) U-Verse network as well as from the emerging online video streaming companies like Netflix, Inc (NASDAQ:NFLX) and Hulu, are posing greater threat to the pay-TV industry.

We maintain our long-term Neutral recommendation on Time Warner Cable. Currently, Time Warner Cable has a Zacks #3 Rank, implying a short-term Hold rating on the stock.

Source: Earnings Preview: Time Warner Cable Inc.