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Comcast (CMCSA) Up 0.4% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for Comcast (CMCSA). Shares have added about 0.4% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Comcast due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Comcast Q4 Earnings Beat Estimates, Revenues Up Y/Y

Comcast reported fourth-quarter 2019 adjusted earnings of 79 cents per share that beat the Zacks Consensus Estimate by 5.3% and increased 9.7% year over year.

Consolidated revenues grew 2% year over year to $28.40 billion and beat the Zacks Consensus Estimate of $28.19 billion.

However, revenues on a pro-forma basis (considering the Sky transaction on Jan 1, 2017) were flat year over year.

Cable Communication Revenue Details

Revenues climbed 2.6% from the year-ago quarter to $14.77 billion. Total Customer Relationships increased 372K to 31.5 million.

High-speed Internet revenues grew 8.8% year over year to $4.79 billion, primarily driven by increased residential high-speed Internet customers and rate adjustments. Total high-speed Internet customer net additions were 442K.
 
Business Services revenues were up 8.8% to $2 billion, driven by customer base expansion.

Wireless revenues jumped 39.4% to $372 million, supported by an increase in the number of customer lines. Comcast added 261K wireless lines in the reported quarter.

Advertising revenues declined 19.1% to $699 million, primarily due to lower political advertising revenues. Excluding political revenues, advertising revenues were flat.

Voice revenues were $944 million, down 3.6% year over year due to a declining number of residential voice customers.

Video revenues dropped 1.2% to $5.51 billion, reflecting a decline in the residential video customer count.

Total video customer net losses were 149K, while total voice customer net losses were 2K.

Other revenues decreased 2.3% from the year-ago quarter to $455 million. Total security and automation customer net additions were 10K in the reported quarter.

NBCUniversal Revenues Decline Y/Y

Revenues declined 2.6% year over year to $9.15 billion.

Cable Networks’ revenues increased 1.2% from the year-ago quarter to $2.93 billion, primarily due to higher content licensing & other revenues (up3.4%) and advertising revenues (up 2%). Distribution revenues were flat year over year.

Broadcast Television revenues increased 2.1% from the year-ago quarter to $3.16 billion, thanks to higher content licensing revenues (up 5.8%) and distribution & other revenues (up 9.9%), partially offset by lower advertising revenues (down 1.5%).

Filmed Entertainment revenues decreased 21% from the year-ago quarter to $1.56 billion. Theatrical revenues declined 59.1% from the year-ago quarter.

Theme Parks revenues were $1.56 billion, up 3.2% year over year on higher guest spending.

Sky Revenue Details

Sky’s pro-forma revenues increased 0.4% year over year to $5.04 billion. At constant currency (cc), revenues increased 1.4%.

Direct-to-consumer revenues were up 1.1% (up 2.3% at cc) from the year-ago quarter to $4.02 billion.

Content revenues rose 2.1% (up 2.7% at cc) to $371 million, benefiting from higher monetization of its slate of original programming and the wholesaling of sports programming.

Advertising revenues deteriorated 5.1% (down4.1% at cc) from the year-ago quarter to $647 million, primarily due to the impact of a change in legislation related to gambling advertisements in the U.K. and Italy along with overall market weakness.

Pro-forma Total Customer Relationships increased 77K to 24 million in the reported quarter.

Operating Details

Consolidated programming & production costs increased 0.5% from the year-ago quarter to $9.30 billion. As a percentage of revenues, programming & production costs shrank 50 basis points (bps) on a year-over-year basis to 32.7%.

Consolidated adjusted EBITDA grew 3% from the year-ago quarter to $8.44 billion. Pro-forma (including Sky operations) adjusted EBITDA increased 2.1%.

Segment-wise, Cable Communications’ adjusted EBITDA rose 5.4% from the year-ago quarter to $5.88 billion. Cable Communications operating expenses increased 0.8% year over year on higher non-programming costs.

Cable Communications results include a loss of $116 million from the wireless business compared with a loss of $191 million in the year-ago quarter.

NBCUniversal’s adjusted EBITDA decreased 4.7% from the year-ago quarter to $2.02 billion, reflecting a decline in Cable Networks, Filmed Entertainment and Theme Parks adjusted EBITDA.

Sky’s adjusted EBITDA on a pro-forma basis was unchanged (up 0.4% at cc) at $765 million. Notably, Sky’s operating costs and expenses rose 0.4% (up1.6% at cc) to $4.28 billion.

Consolidated operating income grew 16.2% year over year to $5.25 billion. Moreover, operating margin expanded 230 bps from the year-ago quarter to 18.5%.

Cash Flow & Liquidity

As of Dec 31, 2019, cash and cash equivalents were $5.50 billion, up from $3.51 billion as of Sep 30.

Moreover, as of Dec 31, consolidated total debt was $102.22 billion, up from $100.89 billion as of Sep 30.

In fourth-quarter 2019, Comcast generated $6.24 billion of cash from operations compared with $5.19 billion in the previous quarter.

Capital expenditures were down 2.5% to $3.1 billion. NBCUniversal’s capital expenditures rose 7.6% to $641 million. Sky reported capital expenditures of $228 million. However, Cable Communications’ capital expenditures decreased 7.8% to $2.1 billion.

Free cash flow was $2.48 billion in the reported quarter, up from $2.1 billion generated in the previous quarter.

Dividends paid out in the fourth quarter were worth $957 million. Comcast also increased its dividend by 10% to 92 cents per share on an annualized basis for 2020.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -5.91% due to these changes.

VGM Scores

At this time, Comcast has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Comcast has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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