Comcast Profits Grow, Sub Adds Slow

Comcast Corp. (Nasdaq: CMCSA, CMCSK) fit in with recent cable trends by posting solid revenue and profit gains in the second quarter coupled with slower subscription growth across all advanced service categories. The tough economy was a factor. As well as the "seasonality" cable sees in the second quarter as college students and snowbirds head home. But despite these obstacles, Comcast, the nation's largest MSO, still beat Wall Street's revenue and earnings expectations. Table 1: Comcast Q2

	2Q08	2Q09	Change (%)
Revenues ($B)	8.55	8.93	4%
Net Income ($B)	0.63	0.96	53%
EPS ($)	0.21	0.33	57%
Source: Comcast Corp.

Table 2: Comcast Vs. Analysts

	Analysts' Consensus Estimate 1Q09	Actual 1Q09
Revenues ($B)	8.86	8.93
EPS ($)	0.26	0.33
Source: Comcast, Reuters, and Sanford Bernstein

Operating cashflow, a metric that analysts sometimes use to gauge the success of cable MSOs, rose 5.5 percent to $3.5 billion. Second-quarter capex reached $1.1 billion (12.5 percent of total revenues in the quarter), down 13.7 percent versus the year-ago quarter. (See Comcast Posts Q2.) Although some operators had been expecting to get a nice lift in basic subs from the digital broadcast TV transition, whose "hard" deadline was moved from Feb. 17 to June 12, it didn't appear to help Comcast much in the second quarter as it lost 214,000 basic video customers, widened from the 138,000 basics it lost in the year-ago period. (See Broadcasters Rally 'Round June 12 .) Comcast managed to add customers in its other residential subscription categories, but, in another continuing trend, new subs were increasingly harder to come by, particularly in the high-speed Internet (HSI) category. Comcast added just 65,000 HSI subs in the second quarter, well off the 171,000 analysts were anticipating. Table 3: Sub Growth Trends

	2Q08	2Q09	Cumulative Sub Total (End of 2Q09)
Total video net adds	-138,000	-214,000	23.89 million
Digital video adds	320,000	250,000	17.54 million
High-speed Internet adds	279,000	65,000	15.32 million
Digital voice adds	555,000	233,000	7 million
Source: Comcast

"As expected, unit growth metrics were weak. But also as expected, financial performance was very, very strong," Sanford C. Bernstein & Co. Inc. analyst Craig Moffett said in a note issued this morning. In Moffett's view, the "most important development of the quarter" was the resumption of Comcast's stock repurchase program. He said Comcast bought back $215 million of stock in the quarter, "reducing the float by 15.5M shares or by 0.5% in the quarter."

We'll have more updates later today on Comcast's other initiatives and product strategies, including the rollout of Docsis 3.0, wireless, the "all-digital" migration, and the Comcast On Demand Online trial. (See Comcast's All Clear in Atlanta, Comcast: Wideband Build Is Nearly Half Done , and Time Warner, Comcast Team Up for TV Everywhere.) — Jeff Baumgartner, Site Editor, Cable Digital News