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What's in Store for Comcast (CMCSA) this Earnings Season?

Comcast Corp. CMCSA, the leading cable multi-service operator (MSO) in the U.S., is slated to report fourth-quarter 2016 results on Jan 26, before the opening bell.

Last quarter, Comcast Corp.’s bottom-line matched the Zacks Consensus Estimate. However, the company’s earnings surpassed the Zacks Consensus Estimate in two of the previous four quarters, with an average beat of 1.58%.

Moreover, shares of Comcast Corp. witnessed growth of 11.86% in the past three months, outperforming the Zacks categorized Cable TV industry's increase of 8.51% in the same time frame.

Let’s see how things are shaping up for this announcement.

Factors at Play

Comcast has forayed into the over-the-top video delivery market with the launch of its Internet TV service – “Stream”. We believe this would help the company check customer churn and provide viewers with more streaming options and flexibility at breakthrough prices. Further, Comcast’s Cable business is doing well and the NBC Universal segment is witnessing significant improvement. It also announced that it will be starting its own wireless service from mid 2017. Moreover, the company is participating in the 600 MHz low-band wireless spectrum auction in the U.S.

Comcast's decision to venture into the U.S. wireless space bodes well with its diversified business model. The company also expanded its theme park business through an alliance with Nintendo Co. Ltd., the worldwide leader in the creation of interactive entertainment and home video game systems such as Nintendo 64 and Game Boy. Further, it has even ventured into the lucrative digital media market seeking growth by investing in online social news site BuzzFeed. We believe that these efforts have been the reason behind Comcast Corp.’s Business Services segment’s strong momentum and revenue growth. Rogers Communications Inc. RCI also announced plans to dump its Internet Protocol TV (IPTV) platform and adopt Comcast Corp.’s cloud-based X1 video platform.

However, intensifying competitive threat, consolidation-related woes, mounting programming costs and a highly leveraged balance sheet remain potent headwinds for the Comcast. Also, the company continues to bear the brunt of increasing programming expenses.

Earnings Whispers

Our proven model does not conclusively show that Comcast is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here as elaborated below.

Zacks ESP: Comcast has an earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged 87 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Comcast has a Zacks Rank #3 which increases the predictive power of ESP. However, the company’s ESP of 0.00%, makes surprise prediction difficult.

Meanwhile, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Comcast Corp. Price and EPS Surprise

 

Comcast Corp. Price and EPS Surprise | Comcast Corp. Quote

Key Picks

Here are some companies that have the right combination of elements to post an earnings beat this quarter.

BlackBerry Limited BBRY, with an earnings ESP of +50.00% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here. BlackBerry’s earnings surpassed the Zacks Consensus Estimate in each of the previous four quarters, with an average beat of 62.50%.

Microsoft Corporation MSFT, with an earnings ESP of +1.28% and a Zacks Rank #2. Its earnings surpassed the Zacks Consensus Estimate in three of the previous four quarters, with an average beat of 10.55%.

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Rogers Communication Inc. (RCI): Free Stock Analysis Report
 
Comcast Corp. (CMCSA): Free Stock Analysis Report
 
Microsoft Corp. (MSFT): Free Stock Analysis Report
 
BlackBerry Ltd. (BBRY): Free Stock Analysis Report
 
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