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Factors to Consider Ahead of Comcast's (CMCSA) Q2 Earnings

Aniruddha Ganguly

Comcast Corp CMCSA is set to report second-quarter 2019 results on Jul 25.

The company beat earnings estimates in the trailing four quarters, the average positive surprise being 7.9%. In the last reported quarter, the company’s adjusted earnings of 76 cents per share outpaced the Zacks Consensus Estimate by a dime.

Moreover, revenues increased 17.8% year over year to $26.86 billion but lagged the Zacks Consensus Estimate of $27.31 billion. Notably, Comcast added 375K high-speed Internet customers in first-quarter 2019.

The Zacks Consensus Estimate for second-quarter 2019 revenues is pegged at $27.19 billion, which indicates growth of almost 25.1% from the year-ago quarter’s reported figure. Moreover, the consensus mark for earnings has remained steady at 75 cents over the past 30 days.

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

Internet & Mobile Subscriber Base Growth: A Key Catalyst

Comcast’s top line in the to-be-reported quarter is expected to benefit from an increasing number of high-speed Internet subscribers. The company’s endeavor to improve network capacity has helped it offer higher broadband speed, attracting new subscribers.
 

Comcast Corporation Price and EPS Surprise

Comcast Corporation Price and EPS Surprise

Comcast Corporation price-eps-surprise | Comcast Corporation Quote

 

Moreover, improving customer experience due to an expanding Wi-Fi coverage and innovative xFi control features is expected to boost subscriber growth.

The Zacks Consensus Estimate for Cable Communication – High Speed Internet revenues is pegged at $4.67 billion. Moreover, the consensus mark for Net Additional Customers: High-Speed Internet Residential stands at 214K.

Further, the company’s Xfinity Mobile is now used by 1.4 million customers. Strong demand for Buy the Gig Plan and increased uptake of Bring Your Own Device program are expected to have expanded the user base, which will get translated into higher revenues and lower wireless EBITDA losses in the to-be-reported quarter.

The Zacks Consensus Estimate for Cable Communication is pegged at $14.43 billion, implying 5.3% growth from the figure reported in the year-ago quarter.

Moreover, NBC Universal’s strong content portfolio is likely to drive growth. Additionally, Comcast’s expanded international footprint due to the Sky acquisition is a tailwind.

Sky’s top line is expected to benefit from the price hike, effective from April, in the U.K.

Reportedly, Comcast plans to more than double its investment in European original programming and start an in-house studio at Sky. The company is expected to invest roughly $1.27 billion (about 1 billion pounds) in Sky Studios programming over the next five years.

However, the company continues to lose video subscribers due to cord-cutting and stiff competition from virtual MVPDs. This is expected to hurt top-line growth.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) along with a positive Earnings ESP has a good chance of beating estimates. The Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.

Comcast has a Zacks Rank #3 and an Earnings ESP of +1.88%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Other Stocks to Consider

Here are a few companies you may want to consider, as our model shows that these have the right combination of elements to post earnings beat in their upcoming releases:

AMC Entertainment Holdings AMC has an Earnings ESP of +12.61% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.    

DISH Network DISH has an Earnings ESP of +0.92% and a Zacks Rank #2.

Weight Watchers International WW has a Zacks Rank #2 and an Earnings ESP of +3.68%.

 

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