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Comcast (CMCSA) Q4 Earnings Beat Estimates, Revenues Grow Y/Y

Zacks Equity Research

Comcast CMCSA reported fourth-quarter 2018 adjusted earnings of 64 cents per share that beat the Zacks Consensus Estimate by a couple of cents. The figure jumped 36.2% year over year.

Revenues on a pro forma basis (including Sky operations from Jan 1, 2017) increased 5.2% year over year to $28.28 billion. Consolidated revenues surged 26.1% year over year to $27.85 billion.

The Zacks Consensus Estimate was $25.74 billion.

Cable Communication Revenue Details

Revenues climbed 5.2% from the year-ago quarter to $14.13 billion.

High-speed Internet revenues increased 10.1% year over year to $4.40 billion, primarily driven by an increase in the number of residential high-speed Internet customers and rate adjustments.

Business Services revenues were up 9.5% to $1.84 billion, primarily due to increasing number of customers adopting the company’s product offerings.

Comcast Corporation Price and Consensus

Comcast Corporation Price and Consensus | Comcast Corporation Quote

Advertising and other revenues advanced 27.7% and 19.1% to $863 million and $467 million, respectively, on a year-over-year basis. Advertising revenues were driven by higher political advertising revenues. Growth in other revenues was driven by an increase in X1 licensing revenues.

Voice revenues were $978 million, down 3% year over year, primarily due to declining number of residential voice customers. Video revenues dipped 1.6% to $5.58 billion, reflecting a decrease in the number of residential video customers.

Total Customer Relationships increased 258K to 30.3 million. Total high-speed Internet customer net additions were 351K. Total security and automation customer net additions were 39K at the end of the quarter. Total video customer net losses were 29K, while total voice customer net losses were 2K.

At the end of the fourth quarter, 67.6% of Comcast’s residential customers received at least two Xfinity products.

NBCUniversal Revenue Details

Revenues increased 7.1% year over year to almost $9.40 billion.

Cable Networks’ revenues increased 8.9% from the year-ago quarter to $2.89 billion, primarily due to higher distribution revenues (up 10.3%), content licensing & other revenues (surged 28.4%), and advertising revenues (flat).

Broadcast Television revenues increased 3.7% from the year-ago quarter to almost $3.10 billion, owing to higher advertising (up 2.1%), and distribution & other revenues (up 18.5%).

Filmed Entertainment revenues increased 14% from the year-ago quarter to $1.98 billion. Theatrical revenues soared 189.3%, driven by strong collections from Dr. Seuss' The Grinch and Halloween. Home Entertainment and content licensing revenues decreased 14.3% and 8.8%, respectively.

Theme Parks revenues were $1.51 billion, increasing 3.5% year over year, reflecting higher attendance and per capita spending.

Sky Revenue Details

Pro forma revenues increased 5.6% year over year at constant currency (cc) to $5.02 billion.

Direct-to-consumer revenues increased 4% from the year-ago quarter at cc to $3.98 billion, primarily driven by improving pay TV penetration, growth in Sky Mobile and Sky Fibre customers, and rate adjustments in the United Kingdom. Average direct-to-consumer revenue per customer relationship increased roughly 1%.

Content revenues jumped 35.7% at cc to $363 million, driven by increased penetration of premium sports and movie channels on third party pay TV networks in the United Kingdom, and higher monetization of the company’s slate of original programming. Notably, the company won exclusive sports rights in Italy and Germany.

At cc, advertising revenues increased 2.9% from the year-ago quarter to $682 million. Revenues grew due to increased sports inventory in Italy and Germany, and growth in advanced advertising in the United Kingdom.

Pro forma Total Customer Relationships increased 164K to 23.6 million in the reported quarter.

Operating Details

Consolidated adjusted EBITDA increased 21.6% from the year-ago quarter to $8.19 billion. However, adjusted EBITDA margin contracted 110 basis points (bps) to 29.4%.

Pro Forma (including Sky operations from Jan 1, 2017) adjusted EBITDA increased 11.1% from the year-ago quarter to $8.26 billion. Moreover, adjusted EBITDA margin expanded 160 bps to 29.2%.

Consolidated programming & production costs increased 34% from the year-ago quarter to $9.25 billion. As percentage of revenues, programming & production costs increased 190 bps on a year-over-year basis.

Consolidated operating income increased 9.3% year over year to $4.51 billion. However, operating margin contracted 250 bps from the year-ago quarter to 16.2%.

Segment wise, Cable Communications adjusted EBITDA increased 7.3% from the year-ago quarter to $5.78 billion. Adjusted EBITDA margin expanded 80 bps to 40.9%. Notably, adjusted EBITDA per Customer Relationship increased 3.8%.

Cable Communications programming expenses increased 2.9% on a year-over-year basis, owing to higher retransmission consent fees and sports programming costs. Non-programming expenses increased 4.5% from the year-ago quarter.

NBCUniversal adjusted EBITDA increased 12.3% from the year-ago quarter to $2.12 billion. Cable Networks and Broadcast Television adjusted EBITDA grew 4.3% and 109.3%, respectively. Theme Parks adjusted EBITDA inched up 0.7%. However, Filmed Entertainment adjusted EBITDA declined 23.6% on a year-over-year basis.

Sky’s adjusted EBITDA on a pro forma basis and at cc increased 12.4% to $765 million. Adjusted EBITDA margin expanded 110 bps to 15.2%.

Notably, Sky’s operating costs and expenses increased 4.5% at cc to $4.26 billion.

Cash Flow & Liquidity

In fourth-quarter 2018, Comcast generated $5.8 billion of cash from operations compared with $6 billion in the previous quarter. Free cash flow was $3.10 billion compared with $4.30 billion in the year-ago quarter.

As of Dec 31, 2018, cash and cash equivalents were $11.10 billion, up from $10.62 billion as of Sep 30, 2018. Consolidated total debt was $111.74 billion.

During the quarter, Comcast paid dividends of $865 million and repurchased shares worth $1 billion. As previously announced, the company will stop buying back shares in 2019 to reduce debt level that increased significantly post the Sky acquisition.

Moreover, Comcast raised dividend by 10% to 84 cents per share on an annualized basis for 2019.

Zacks Rank & Stocks to Consider

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

Charter Communications CHTR, Cable One CABO and WideOpenWest WOW are stocks worth considering in the same industry. All three stocks sport a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

While Charter Communications is set to report on Jan 31, Cable One and WideOpenWest are expected to report on Mar 7 and 13, respectively.

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