Comcast Beats Buoyed by Olympics - Analyst Blog

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Comcast Corp. ( CMCSA ) maintains its strong momentum in the third quarter of 2012, supported by healthy businesses generated during the London Olympics. While the company's Cable businesses continue to beat market expectations, NBC Universal division makes a turnaround. Importantly, the company's struggling basic video operation continues its positive momentum.

GAAP net income for the third quarter of 2012 was $2,113 million or 78 cents per share against a net income of $908 million or 33 cents per share in the prior-year quarter. Quarterly adjusted earnings per share of 46 cents were exactly in line with the Zacks Consensus Estimate. Total revenue came in at $16,544 million in the reported quarter, beating the Zacks Consensus Estimate of $16,035 million, up 15.4% year over year.

Quarterly operating costs and expenses were $11,536 million, up 18.1% year over year. However, quarterly operating income was $3,048 million, representing an annualized growth of 15.4%. Operating margin, in the third quarter of 2012, was 18.4%, remaining same year over year. During the reported quarter, Comcast repurchased 22.9 million of its common shares for a consideration $750 million and paid dividends totaling $435 million.

During the third quarter of 2012, Comcast generated $5,008 million of cash from operations compared with $4,574 million in the year-ago quarter. Consolidated free cash flow in the reported quarter was $1,514 million compared with $1,392 million in the prior-year quarter. Cash and cash equivalents, at the end of the reported quarter, were $8,899 million compared with $1,620 million at the end of 2011.

Total debt at the end of the previous quarter was approximately $38,590 million compared with $39,309 million at the end of 2011. At the end of the third quarter, debt-to-capitalization ratio was 0.42 compared with 0.44 at the end of 2011.

Cable Communications Segment

Quarterly total revenue was $9,976 million, up 6.9% year over year. Operating cash flow was $3,998 million, up 7.7% year over year. Within this segment, Video revenue was $5,021 million, up 2.7% year over year. High-Speed Internet revenue was $2,403 million, up 8.8% year over year. Voice revenue was $895 million, up 1.5% year over year. Advertising revenue was $607 million, up 23.5% year over year. Business Services revenue was $621 million, up 33.6% year over year. Other revenue was $429 million, up 9.4% year over year.

As of September 30, 2012, Comcast had 19.025 million (up 6.8% year over year) High-Speed Internet customers; 9.787 million (up 6.4% year over year) Voice customers; and 22.002 million (down 1.6% year over year) Video customers. In the reported quarter, Comcast lost a net total of 117,000 video customers compared with a net loss of 165,000 customers in the prior-year quarter. The company added a net 287,000 High-Speed Internet customers compared with 261,000 in the year-ago quarter. Similarly, Comcast added a net total of 123,000 voice customers compared with 138,000 in the prior-year quarter.  In the previous quarter, monthly ARPU from video customers increased 8.7% to $150.73.

NBC Universal Segment

Quarterly total revenue was $6,822 million, up 31.2% year over year. The segment's pro forma operating cash flow was $1,140 million, showing a 19.9% year-over-year growth. Within this segment, Cable Networks revenue was $2,165 million, up 3.2% year over year. Broadcast TV revenue was $2,777 million, up 83.8% year over year. Alongside, Filmed Entertainment revenue was $1,355 million, up 23.6% year over year. Theme Parks revenue was $614 million, up 5.8% year over year.

Our Take

Comcast becamethe largest integrated content development and distribution company in the U.S.after completing the acquisition of the majority stake of NBC Universal from General Electric Co. ( GE ). We also remain quite optimistic regarding the company's diversification, network upgrade and innovative product offering strategies. Comcast continues to post strong growth in revenue and free cash flow. We maintain our long-term Neutral recommendation on Comcast. Currently, it holds a Zacks#2 Rank (Buy) on the stock.



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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



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Referenced Stocks: CMCSA , GE

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