Comcast results beat estimates; contain other positive signs

Tom Paine


Normally, it is difficult to get too excited when a giant corporation reports quarterly revenue growth of 3% (apples to apples) over the prior year with adjusted operating cash flow growth of 4.2%. But Comcast's results announced this morning exceeded analysts' estimates, and perhaps contain other positive signs that could point to increased growth, although NBCU remains an area of uncertainty.

Perhaps the most important number was the decline in video subscriber losses. Net losses in Q4 2011 were 17,000, versus 135,00 in Q4 2010. During Comcast's earnings conference call, management indicated a belief that they have stabilized video subscriber losses, despite the lack of new housing starts, although they are not yet predicting growth. Comcast Cable CEO Neil Smit cited an improving competitive environment, including the slowing RBOC (Verizon, AT&T) buildout as well as Comcast's own marketing efforts. Another positive area was High-Speed Internet services, where Comcast added over 1 million (net) new customers in 2011 and revenue grew by 10.1%.

While the NBC broadcast network and Universal Studios continued to lag, NBCU's cable networks produced solid results. The real star of the NBCU side of the businesss was the Universal Theme Parks business, where revenue grew 24% and operating cash flow grew 41% for the year. This reflects a full year comparison to 2010, although Comcast only acquired full ownership on July 1, 2011. In terms of the NBC broadcast network, management emphasized that 2011 was a year for investment and integration, with the hoped for payoff coming further down the road.

Business Services revenue grew at a 37% rate in the 4th quarter, and that segment is now at a $2 billion annual run rate. Comcast believes it is well positioned for further expansion in a market that has $20 to 30 billion potential.

Comcast Chairman & CEO Brian Roberts spoke of the rollout of the new Xcalibur initiative, which now been branded as the X1 platform. Roberts said the goal for 2012 was to get X1 into "hundreds of thousands of homes in multiple markets". Roberts emphasized that XCalibur would move many capabilities "out of the box and into the cloud", and change the way users interact with their TVs and other consumer electronics devices.

Although the controversial Comcast/Verizon Wireless joint marketing arrangement is now active in four markets, Comcast execs didn't seem anxious to discuss details about it, other than saying they hoped to get regulatory approval for the spectrum sale part of the arrangement later this year.

Comcast also spoke of expanding its WiFi initiative, which now is mostly running in the Philadelphia/New Jersey area, into other markets, with an emphasis on data rather than voice.

Key cost pressures were sales & marketing, up 11.8%, and programming expenses, up 5.8%. Programming cost increases are expected to remain a major issue.

In terms of its financial strategy, Comcast boosted its dividend by 44% and announced a $6.5 billion share repurchase plan. The company emphasizes that through these two means most of its free operating cash flow from the cable business is being returned to shareholders, while cash flow from NBCU is being accumulated toward the possible eventual buyout of GE's interest in the NBCU joint venture.

Comcast shares are up 4.73% in mid-day trading today.



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