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Comcast Q4 Earnings Lag, Revenues Top on Subscriber Gain

A Clark

Comcast Corp. CMCSA reported mixed financial results in the fourth quarter of 2015 wherein earnings missed the Zacks Consensus Estimate but revenues surpassed the same. Meanwhile, the company witnessed strong subscriber gain. Additionally, management significantly raised its shareholders’ wealth. Comcast currently carries a Zacks Rank #3 (Hold).  

GAAP net income in the fourth quarter of 2015 came in at $1,971 million or 79 cents per share compared with $1,925 million or 74 cents per share in the comparable prior-year quarter. Quarterly adjusted earnings per share of 81 cents were a penny short of the Zacks Consensus Estimate.

Meanwhile, quarterly total revenue was $19,245 million, up 8.5% year over year and substantially ahead of the Zacks Consensus Estimate of $18,778 million.

Quarterly operating costs and expenses totaled $12,973 million, up 9.4% year over year. However, quarterly operating income came in at $4,002 million, representing annualized growth of 5.7%. Operating margin was 20.8% compared with 21.4% in the prior-year quarter. During the fourth quarter, Comcast repurchased 16.3 million common shares for $980 million and paid dividends of $614 million.

In the fourth quarter of 2015, Comcast generated $6,272 million of cash from operations compared with $5,877 million in the year-ago quarter. Free cash flow was $1,588 million compared with $1,694 million in the prior-year quarter.

Cash and marketable securities, at 2015 end, were $2,401 million compared with $4,512 million at the end of 2014. Total debt at 2015 end was $52,621 million versus $48,234 million at the end of 2014. The debt-to-capitalization ratio was 0.48, compared with 0.45 at 2014 end.

Increase in Shareholders’ Wealth

Comcast announced a 10% increase in its dividend on an annualized basis to $1.10 per share. In addition, the company announced that the board of directors has increased its stock repurchase authorization to $10.0 billion. Comcast plans to repurchase shares worth $5.0 billion during 2016, subject to market conditions.

Cable Communications Segment

Quarterly total revenue of $11,980 million reflected a 5.9% year-over-year rise. Operating cash flow was $4,900 million, up 4.6% year over year. Within this segment, Video revenues were $5,416 million, up 4.4% from the prior-year quarter. High-Speed Internet revenues totaled $3,197 million, up 9.8% year over year. Voice revenues were $899 million, down 1.7% year over year. Advertising revenues totaled $639 million, down 9.3% from the year-ago quarter. Business Services revenues were $1,259 million, up 18.9% year over year. Other revenues were $570 million, up 6.4% from the prior-year quarter.

As of Dec 31, 2015, Comcast had 23.329 million (up 6.2% year over year) high-speed Internet customers; 11.475 million (up 2.5% year over year) voice customers; and 22.347 million (down 0.2% year over year) video customers. The company added a net of 460,000 high-speed Internet customers, 139,000 voice customers and 89,000 video subscribers in the reported quarter. Comcast gained 238,000 triple-play subscribers and 472,000 double-play subscribers but lost 43,000 single-play subscribers, in the reported quarter.

NBC Universal Segment

Quarterly total revenue of $7,477 million reflected a 13% year-over-year increase. Operating cash flow was $1,551 million, indicating an 8.7% year-over-year rise. Within this segment, Cable Networks revenues were $2,407 million, up 3.4% year over year. Broadcast TV revenues came in at $2,498 million, up 7% year over year. Filmed Entertainment revenues were $1,629 million, highlighting a rise of a substantial 25.8% from the year-ago quarter. Theme Parks revenues were $1,019 million, up a whopping 38.6% year over year.

Latest Developments

In Oct 2015, Comcast inked a deal with Verizon Communications Inc. VZ to become a MVNO (mobile virtual network operator) and offer wireless services. The company is likely to initiate its wireless offerings from the second half of 2016. Comcast also stated the possibility of the MVNO agreement being extended in the near future with Sprint Corp. S and other wireless operators. 

Comcast’s wireless service is likely to be a hybrid product relying primarily on its WiFi hotspots, as it uses Verizon’s cellular network as a back-up to fill-in for areas that lack adequate WiFi coverage. At present, Comcast boasts an extensive public WiFi network consisting of nearly 11 million hotspots.

Comcast is also expanding its business services division to cater to large enterprises amid mounting video subscriber churn and competitive threat from online video streaming providers like Netflix Inc. NFLX and Hulu. The company plans to woo business customers with WiFi Pro – its latest Wi-Fi solution. The solution comprises cloud-based controls, marketing tools and added innovative capabilities to bring fast Wi-Fi speeds and expanded range to small and medium-sized businesses (SMBs) as well as branch locations of large enterprises.

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