Can Time Warner Cable Surge Higher Post-Earnings?

With shares of Time Warner Cable (NYSE:TWC) trading around $133, is TWC an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Time Warner Cable is a provider of video, high-speed data, and voice services in the United States, with systems located in five geographic areas: New York, the Carolinas, Ohio, Southern California, and Texas. The company offers its residential and business services customers numerous services over its broadband cable systems. With such a large and growing user base, look for Time Warner Cable to continue to see rising profits from its media, entertainment, and communications offerings.

Time Warner Cable today reported financial results for its fourth-quarter and full year ended December 31, 2013. Time Warner Cable Chair and CEO Rob Marcus said that, "I'm really excited about the progress we made in Q4 and the significantly better trends we're driving as we enter 2014. We are geared up to manage this company for the long haul. We've got the right assets and a talented, passionate and motivated team aligned around a thoughtful plan. We are executing well and we've started the year with meaningful operating momentum."

T = Technicals on the Stock Chart Are Strong

Time Warner Cable stock has been coasting higher over the past several years. The stock is currently trading sideways and may need time to consolidate. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Time Warner Cable is trading above its rising key averages, which signal neutral to bullish price action in the near-term.

(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of Time Warner Cable options may help determine if investors are bullish, neutral, or bearish.

	Implied Volatility (IV)	30-Day IV Percentile	90-Day IV Percentile
Time Warner Cable options	20.90%	30%	28%

What does this mean? This means that investors or traders are buying a minimal amount of call and put options contracts, as compared to the last 30 and 90 trading days.

	Put IV Skew	Call IV Skew
February Options	Flat	Average
March Options	Flat	Average

As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a minimal amount of call and put option contracts and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Increasing Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Time Warner Cable’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Time Warner Cable look like and more importantly, how did the markets like these numbers?

	2013 Q4	2013 Q3	2013 Q2	2013 Q1
Earnings Growth (Y-O-Y)	12.50%	-29.23%	14.69%	11.67%
Revenue Growth (Y-O-Y)	1.68%	2.89%	2.70%	6.64%
Earnings Reaction	1.09%*	2.79%	3.16%	-0.58%

Time Warner Cable has seen rising earnings and revenue figures over the last four quarters. From these numbers, the markets have been pleased with Time Warner Cable’s recent earnings announcements.

* As of this writing

P = Average Relative Performance Versus Peers and Sector

How has Time Warner Cable stock done relative to its peers, Comcast (NASDAQ:CMCSA), Dish Network (NASDAQ:DISH), DirecTV (NASDAQ:DTV), and sector?

	Time Warner Cable	Comcast	Dish Network	DirecTV	Sector
Year-to-Date Return	-1.37%	3.32%	-2.45%	0.41%	-1.02%

Time Warner Cable has been an average relative performer, year-to-date.

Conclusion

Time Warner Cable provides entertainment, voice, and high-speed data services to a growing customer base in the United States. The company reported fourth-quarter earnings that left investors pleased. The stock has been moving higher over the past several years, but is currently trading sideways. Over the last four quarters, earnings and revenues have been on the rise. Relative to its peers and sector, Time Warner Cable has been an average year-to-date performer. Look for Time Warner Cable to OUTPERFORM.