Cox Enterprises Inc

Overview Key strengths Key risks Above-average broadband penetration that provides good revenue visibility. Fiber-based competition could increase to 55% of CEI?s footprint within five years. High barriers to entry, given capital spending requirements and rights of way. 5G fixed wireless competition could result in slowing subscriber growth. Increasing demand for broadband presents opportunities to increase earnings for the next several years.Strong financial flexibility, with the ability to accommodate moderate merger and acquisition (M&A) activity and remain within the BBB rating thresholds.Strong liquidity position enabled by solid free operating cash flow (FOCF) generation and low dividend to the Cox family. Auto segment is more susceptible to macroeconomic pressure.Longer-term regulatory uncertainty and the potential for price regulation in less competitive markets. The

...Low leverage combined with healthy FOCF and mid-single-digit EBITDA growth provides significant financial flexibility. The company's S&P-adjusted net leverage is 1.3x as of Dec. 31, 2021, relative to our downgrade trigger of 3.25x. We believe management enjoys the flexibility afforded in the current rating to pursue acquisitions and incur higher capital expenditure (capex) spending to support cable network upgrades. We believe the company will continue to deploy a disciplined financial policy such that it maintains its current rating profile in the event of a large deal or series of acquisitions. We believe fiber-based competition will limit Cox Enterprises Inc. (CEI) market share gains in new fiber markets but do not expect CEI to lose a significant share in these markets. Our base case is for fiber-based competition to cover 50%-55% of CEI's footprint by 2025, up from our estimate of around 30% today. We believe this will eliminate subscriber growth in these markets, as fiber is the best...

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