The Zacks Analyst Blog Highlights: ArcelorMittal, Time Warner Cable, Netflix, Google and Amazon.com
Zacks Equity Research
For Immediate Release
Chicago, IL – March 11, 2013 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog includeArcelorMittal (MT), Time Warner Cable Inc. (TWC), Netflix Inc. (NFLX), Google Inc. (GOOG) and Amazon.com Inc. (AMZN).
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Here are highlights from Friday’s Analyst Blog:
ArcelorMittal Kept at Underperform
We retained our Underperform recommendation on steel bellwether ArcelorMittal (MT) following its lackluster fourth-quarter 2012 results. Our view reflects the weak steel pricing environment and softness across end markets.
Why Maintained?
ArcelorMittal posted a bigger loss in the fourth quarter, reported on Feb 6, hurt by hefty goodwill impairment charges. Both revenues and adjusted loss per share missed the Zacks Consensus Estimates.
ArcelorMittal’s top line went down 14% in the fourth quarter as it had to contend with difficult economic environment, especially in its biggest market Europe. The company expects the weaker demand environment to sustain in the near and medium term.
ArcelorMittal remains affected by the challenging economic conditions in Europe. It is also exposed to volatility in steel pricing and tough competition and has significant debt which is almost equal to its market capitalization.
Increased domestic imports, production ramp ups by peers and increased Chinese production have led to oversupply in the industry, which in turn caused a drop in steel prices. The effect of price declines was witnessed across all segments in the fourth quarter and led to a contraction in the top line.
Moreover, demand for steel remains weak. The world economy is struggling and the recessionary conditions persist in Europe. Moreover, China’s economy remains somewhat sluggish and there is a demand-supply gap in the U.S. Weak construction activity in the U.S. and Europe remains another concern. Weakness in key end markets may hinder ArcelorMittal’s earnings power moving ahead.
Also, ArcelorMittal is saddled with high debt. Although the company is diligently working toward reducing the amount of debt on its books through divestments, a net debt of roughly $21.8 billion against a market capitalization of around $22.5 billion is concerning.
ArcelorMittal currently retains a Zacks Rank #5 (Strong Sell).
TWC TV Gets New Address
TWC TV, the regional cable television network of Time Warner Cable Inc. (TWC) is now available on Roku player and Roku streaming devices in the U.S. This is the first time that Time Warner Cable has allowed its TV application for streaming to go on a consumer device connected to a television. Earlier in Jan 2013, Time Warner Cable and Roku Inc. announced their collaboration to bring TWC TV to the Roku platform.
Time Warner Cable’s video, who already owns Roku boxes, will now enjoy 300 television channels including the very popular Animal Planet, Food Network and HGTV. Customers also get the option of checking out recently viewed channels and can also create their own favorite channel list. However, channel availability will depend upon the typical market and subscription package selected by the customer.
Additionally, the deal will allow Time Warner Cable’s customers to access live TV and Internet-based video from streaming sites such as Netflix Inc. (NFLX) and Google Inc.’s (GOOG) YouTube using the same set top box.
Online video streaming service providers like Netflix Inc. Hulu.com, YouTube, Amazon.com Inc. (AMZN) etc. have become sources of potential threat to the traditional cable TV operators as they offer an extremely cheaper source of TV programming.
We view this agreement as a win-win for both the companies. This is going to be a milestone deal for Roku as it is expected to increase the sales of its set top Roku player. Simultaneously it will allow Time Warner to popularize its TV application and capitalize on the popularity gains of streaming services.
However, it had been noted earlier that about 30% Roku users do not use any other Pay-TV service. We believe availability of this latest streaming service could significantly impact Time Warner Cable’s falling residential video business, which has lost 129,000 video customers in the recently concluded quarter.
Moreover, the demand for streaming service through over-the-top (‘OTT’) set top box market has been growing for quite some time and has been mostly dominated by Apple TV and Roku. The space is expected to get more competitive as Google TV and Intel Corporation are expected to enter the OTT set top box market.
Currently, Time Warner Cable carries a Zacks Rank #5 (Strong Sell).
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