Comcast Corp. ( CMCSA ) reported mixed financial results for the second quarter of 2014. The company's net earnings easily outpaced the Zacks Consensus Estimate due to a 4.5% year-over-year rise in average revenue per user (ARPU) per month to $137.24. The upside was supported by a 2% price rise of services at the beginning of 2014 and a significant increase in triple-play bundled services subscriber base.
However, Comcast's top-line fell well below the Zacks Consensus Estimate. In the reported quarter, the company lost a sizeable 144,000 video subscribers. This can be primarily attributed to Comcast's less-than-expected revenue growth.
Yesterday, online video streaming service provider and Comcast's major competitor Netflix Inc. ( NFLX ) reported strong subscriber growth both in the U.S. and also in the international markets. Comcast currently has a Zacks Rank #3 (Hold).
Second-Quarter Results in Detail
GAAP net income in the second quarter came in at $1,992 million or 76 cents per share compared with $1,734 million or 65 cents per share in the prior-year quarter. Further, quarterly adjusted earnings per share of 75 cents steered past the Zacks Consensus Estimate of 72 cents. Meanwhile, total revenue stood at $16,844 million, up 3.5% year over year and lagged the Zacks Consensus Estimate of $16,954 million.
Quarterly operating costs and expenses totaled $11,040 million, up 1.8% year over year. However, quarterly operating income came in at $3,804 million, representing annualized growth of 10.7%. Operating margin was 22.6% compared with 31.7% in the prior-year quarter. During the second quarter, Comcast repurchased 15 million worth of common shares for $750 million and paid dividends valued $585 million.
In the second quarter of 2014, Comcast generated $5,804 million of cash from operations compared with $5,425 million in the year-ago quarter. Consolidated free cash flow stood at $1,155 million as against $1,948 million in the prior-year quarter.
Cash and marketable securities, at the end of the second quarter of 2014, were $3,854 million against $5,291 million at the end of 2013. Total debt at the end of the reported quarter was $46,549 million as against $44,567 million at the end of 2013. The debt-to-capitalization ratio was 0.45 compared with 0.47 at the end of 2013.
Cable Communications Segment
Quarterly total revenue of $11,029 million reflected a 5.4% year-over-year rise. Operating cash flow was $4,564 million, up 5.3% year over year. Within this segment, Video revenues were $5,239 million, up 1.2% from the prior-year quarter. High-Speed Internet revenues totaled $2,819 million, up 9.7% year over year. Voice revenues were $922 million, up 1.3% year over year. Advertising revenues were $599 million, up 7.5% from the year-ago quarter. Business Services revenues were $965 million, up 22.4% year over year. Other revenues were $485 million, up 3.9% from the prior-year quarter.
On Jun 30, 2014, Comcast had 21.271 million (up 6.4% year over year) High-Speed Internet customers; 11.003 million (up 6.5% year over year) Voice customers; and 22.457 million (down 0.9% year over year) Video customers. The company added a net of 203,000 High-Speed Internet customers compared with 187,000 in the year-ago quarter. Similarly, Comcast gained 137,000 Voice customers as against 161,000 in the prior-year quarter. On the other hand, the company lost 144,000 video subscribers compared with a loss of 162,000 video customers in the year-ago quarter.
In the reported quarter, Comcast gained 152,000 triple-play subscribers but lost 82,000 and 95,000 double-play and single-play subscribers, respectively.
NBC Universal Segment
Quarterly total revenue of $6,016 million reflected a mere 0.3% year-over-year growth. Operating cash flow was $1,434 million, indicating a 20.4% year-over-year increase. Within this segment, Cable Networks revenues were $2,476 million, up 2.6% year over year. Broadcast TV revenues came in at $1,816 million, up 4.9% year over year. Filmed Entertainment revenues were $1,176 million, highlighting a reduction of 15.3% from the year-ago quarter. Theme Parks revenues were $615 million, up 12.8% year over year.
In Apr 2014, Comcast reached an agreement with Charter Communications Inc. ( CHTR ) to divest 3.9 million subscribers as a strategic decision to ease regulatory concerns over its proposed merger with Time Warner Cable Inc. ( TWC ).
In Feb 2014, Comcast had reached an agreement with Time Warner Cable to acquire the latter in an all-stock deal valued at around $45.2 billion. The deal is expected to face tough scrutiny and close monitoring by regulator, Federal Communications Commission (FCC) and is likely to get a decision within a year.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report