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Comcast (CMCSA) Q3 Earnings Beat Estimates, Revenues Miss

Zacks Equity Research

Comcast CMCSA reported third-quarter 2019 adjusted earnings of 79 cents per share that beat the Zacks Consensus Estimate by a penny. The figure increased 16.2% year over year.

Consolidated revenues increased 21.2% year over year to $26.83 billion but lagged the Zacks Consensus Estimate of $26.86 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 4% from the year-ago quarter to $14.58 billion. Total Customer Relationships increased 309K to 31.2 million.
 

Comcast Corporation Price, Consensus and EPS Surprise

Comcast Corporation Price, Consensus and EPS Surprise

Comcast Corporation price-consensus-eps-surprise-chart | Comcast Corporation Quote

 

High-speed Internet revenues grew 9.3% year over year to $4.72 billion, primarily driven by increased residential high-speed Internet customers and rate adjustments. Total high-speed Internet customer net additions were 379K.

Business Services revenues were up 9.3% to $1.97 billion, driven by customer base expansion.

Wireless revenues jumped 38.1% to $326 million, supported by an increase in the number of customer lines. Comcast added 204K wireless lines in the reported quarter.

Other revenues rose 13.4% from the year-ago quarter to $459 million, primarily owing to higher sales from security and automation services. Total security and automation customer net additions were 8K in the reported quarter.

Advertising revenues declined 11.9% to $603 million, primarily due to lower political advertising revenues. Excluding political revenues, advertising revenues increased 1.2%.

Voice revenues were $963 million, down 1.9% year over year, due to a declining number of residential voice customers.

Video revenues dropped 0.9% to $5.54 billion, reflecting a decline in the residential video customer count.

Total video customer net losses were 224K, while total voice customer net losses were 65K.

At the end of the third quarter, 65.6% of Comcast’s residential customers received at least two Xfinity products.

NBCUniversal Revenues Down Y/Y

Revenues declined 3.5% year over year to almost $8.30 billion.

Cable Networks’ revenues decreased 2.8% from the year-ago quarter to $2.77 billion, primarily due to lower content licensing & other revenues (down 27.2%), partially negated by higher distribution revenues (up 1.6%). Advertising revenues were flat year over year.

Broadcast Television revenues declined 9.1% from the year-ago quarter to $2.23 billion, thanks to lower advertising (down 12.1%) and content licensing revenues (down 17%), partially offset by increased distribution & other revenues (up 5.8%).

Filmed Entertainment revenues decreased 6.2% from the year-ago quarter to $1.71 billion. Theatrical revenues declined 8.8% due to a lower number of major releases than the year-ago quarter. Home entertainment revenues were down 28.5% year over year.

Theme Parks revenues were $1.63 billion, up 6.8% year over year on higher attendance.

Sky Revenue Details

Pro-forma revenues decreased 4.2% year over year to $4.55 billion. At constant currency (cc), revenues increased 0.9%.

Direct-to-consumer revenues declined 3.2% (up 1.9% at cc) from the year-ago quarter to $3.79 billion.

Content revenues rose 9.4% (up 15.4% at cc) to $376 million, benefiting from higher monetization of its slate of original programming and the wholesaling of sports programming.

Advertising revenues deteriorated 18.2% (down 13.8% at cc) from the year-ago quarter to $446 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 decreased 99K to 23.9 million in the reported quarter.

Operating Details

Consolidated programming & production costs increased 23.9% from the year-ago quarter to $8.32 billion. As a percentage of revenues, programming & production costs expanded 70 basis points (bps) on a year-over-year basis to 31%.

Consolidated adjusted EBITDA grew 17% from the year-ago quarter to $8.55 billion. Pro-forma (including Sky operations) adjusted EBITDA increased 7.4%.

Segment-wise, Cable Communications’ adjusted EBITDA rose 6.7% from the year-ago quarter to $5.80 billion. Cable Communications operating expenses increased 2.3% year over year on higher non-programming costs.

Cable Communications results include a loss of $94 million from the wireless business compared with a loss of $178 million in the year-ago quarter.

NBCUniversal’s adjusted EBITDA increased 1.6% from the year-ago quarter to $2.09 billion, reflecting growth in Broadcast Television and Theme Parks adjusted EBITDA.

Sky’s adjusted EBITDA on a pro-forma basis rose 38.3% (up 46% at cc) to $899 million. Notably, Sky’s operating costs and expenses fell 10.9% (down 6.2% at cc) to $4.06 billion.

Consolidated operating income grew 10.4% year over year to $5.34 billion. However, operating margin contracted 190 bps from the year-ago quarter to 19.9%.

Cash Flow & Liquidity

As of Sep 30, 2019, cash and cash equivalents were $3.51 billion, down from $3.92 billion as of Jun 30, 2019.

Moreover, as of Sep 30, 2019, consolidated total debt was $100.89 billion, down from $109.09 billion as of Jun 30, 2019.

In third-quarter 2019, Comcast generated $5.19 billion of cash from operations compared with $7 billion in the previous quarter.

Capital expenditures were up 5.3% to $2.5 billion. NBCUniversal’s capital expenditures rose 24.7% to $505 million. Sky reported capital expenditures of $104 million.

Free cash flow was $2.1 billion in the reported quarter, down from $4.20 billion generated in the previous quarter.

During the quarter, Comcast paid out dividends worth $955 million.

Zacks Rank & Stocks to Consider

Currently, Comcast carries a Zacks Rank #3 (Hold).

Activision Blizzard ATVI, Discovery DISCA and Lionsgate Entertainment LGF.A are stocks worth considering in the broader consumer & discretionary sector. All three stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Activision Blizzard, Discovery and Lionsgate are scheduled to report quarterly results on Nov 7.

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