Comcast Profit, Revenue Top Estimates on Premium-Product Sales
Comcast Corp., the largest U.S. cable company, posted second-quarter profit and sales that beat analysts’ estimates as more customers elected premium services such as digital video recorders and high-speed Internet.
Profit, excluding costs related to the company’s pending takeover of NBC Universal Inc., was 33 cents a share, on sales of $9.53 billion, Comcast said today in a statement. That topped the 32-cent average of estimates compiled by Bloomberg. Analysts predicted the cable operator’s sales would be $9.28 billion.
Through promotions and system upgrades, Chief Executive Officer Brian Roberts has signed up bandwidth-hungry customers willing to pay more for the most advanced products available, such as high-speed Internet and digital video recorders. The company added 118,000 new broadband subscribers in the quarter and boosted its average monthly revenue per customer by 8 percent to $127.78.
“The share shift from DSL to cable is accelerating as people need and want more bandwidth,” said Todd Mitchell, an analyst at Kaufman Bros. LP in New York, who advises clients to hold the stock. “Cable just offers a superior product.”
Verizon Communications Inc. and AT&T Inc. reported declines in DSL, or digital subscriber line, customers in the second quarter, which bodes well for cable’s competitive edge and growth prospects, Mitchell said. AT&T lost 348,000 DSL subscribers in the second quarter, while Verizon shed 168,000.
Consumer Confidence
Confidence among U.S. consumers declined in July to a five- month low, according to a report from the New York-based Conference Board, raising concerns about customers’ ability and willingness to spend. Comcast’s results showed more of its customers are willing to spend extra on home entertainment and offerings like pay-per-view.
In the second quarter, 31 percent of Comcast’s 23 million video customers selected to purchase all three of the company’s offerings in a bundle: TV, Internet and phone. That’s up from 26 percent in the year prior. The company added 394,000 digital video customers as they continue to promote their all-digital rollout.
“They’re monetizing their subscriber base better than expected, aiming for profitable growth,” said David Joyce, an analyst at Miller Tabak & Co. LLC in New York. “They converted a lot more of their subscribers than we expected to digital video, so that’s good to create long-term growth and incremental revenue streams.”
Net Income
Comcast’s net income fell 8.6 percent to $884 million, or 31 cents a share, from $967 million, or 33 cents, a year earlier. The cable operator’s results were bolstered by a $137 million tax benefit in the year-earlier period.
Comcast rose 2 cents to $19.45 at 9:56 a.m. New York time on the Nasdaq Stock Market. The stock had gained 15 percent this year before today.
The company added a net 477,000 customers for Internet, phone and digital TV last quarter, compared with 1.02 million in the first quarter. The second quarter is typically light on subscriber additions as college students disconnect their service while on summer vacation.
By paring capital spending as a percentage of sales and making the most of limited subscriber gains, Comcast boosted its operating cash flow by 5.7 percent to $3.74 billion. The company used some of its cash to repurchase 17.3 million shares in the quarter at a cost of $300 million.
NBC Universal
Comcast expects to complete the regulatory review for its proposed majority takeover of General Electric Co.’s NBC Universal this year, said Roberts on the company’s conference call today. The $28 billion transaction is being evaluated by the U.S. Department of Justice and Federal Communications Commission.
The cable operator is more optimistic about the deal’s prospects than when it was first announced in December, said Stephen Burke, Comcast’s chief operating officer. Comcast’s cable segment posted advertising revenue growth of 23 percent in the quarter. Comcast and NBC Universal will have about $10 billion annually in advertising sales combined, Burke said.
“Advertising has got to be the biggest headline,” said Burke on the company’s conference call. “We signed the deal when advertising was going backwards. Now we’re seeing it going up, and that’s a big deal.”
In addition, Comcast has been able to secure financing at “very attractive rates” for the deal, and NBC has had success on several projects, including the movie ‘Despicable Me,’ Burke said.
To contact the reporter on this story: Kelly Riddell in Washington at (-REDACTED-)
