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Comcast Asks Wall Street: Where Is the Love?

Alan Breznick
7/26/2018

Like a lover who's been taken for granted, Comcast is seeking to revive its romance with Wall Street right now.

Feeling a bit jilted by the financial community because of the tumble that its stock has taken since the cable powerhouse made its twin bids for 21st Century Fox and Sky earlier this year, Comcast Corp. (Nasdaq: CMCSA, CMCSK) seems determined to win back the Street's confidence in its long-term growth strategy. Speaking on the company's second-quarter earnings call Thursday morning, Comcast executives repeatedly played up the virtues of their broadband, video and mobile product diversification approach as they presented strong overall results for the quarter, which included healthy revenue and net income increases and robust broadband and wireless subscriber gains. (See Comcast Reports Q2 2018 Results.)

"We have a unique and special company with a terrific team and great operating momentum," said Comcast Chairman and CEO Brian Roberts, saying he felt the need to "reiterate something that perhaps has been lost" by the Street in recent months. "These excellent second quarter results underscore all of this."

Roberts undoubtedly felt that need because Comcast's share price plunged from a high of nearly $43 in late January -- before it made its ambitious bids for Fox and Sky -- to a low of $30.60 in early May. Since then, the stock has drifted upward again to about $35 but remains well below its earlier peak.

Trying to shift the focus away from Fox and Sky, Comcast officials barely touched on those two ambitious acquisition attempts on the call. Only in response to an analyst's question did Roberts say that Fox represented "a unique opportunity" that was "mostly about international expansion," not creating greater scale or developing new products. In the end, he said, Comcast withdrew from the bidding war with Disney because "we thought that we couldn't build enough shareholder value" as the auction price soared. (See Comcast Gives Up on Fox, Focuses on Sky.)

"We've looked at a lot of things -- thousands of transactions over 50 years, and we've done several hundred," he said. "And we have more times than not been able to create shareholder value if we can make those acquisitions work."

As for Comcast's still pending $32.5 billion offer for Sky, which trumped Fox's last bid, Roberts merely reiterated that company officials are still enthralled with the British satellite TV and OTT video provider. "We think it's a great business, it will fit well, good use of capital," he said. "It's also unique, but I don't want to say any more today." (See Eurobites: Comcast Ups Its Bid for Sky.)

Instead, Roberts and his three top lieutenants on the earnings call focused on why Wall Street should fall in love again with Comcast's fundamental strengths. Running through the numbers, they boasted about their year-over-year revenue gains, including both consolidated revenue (up 2.1% to $21.7 billion) and cable operations revenue (up 3.4% to $13.7 billion). They bragged about earnings growth, including total earnings (up to $3.22 billion, or 69 cents a share, from $2.52 billion, or 52 cents a share, a year earlier). And they bragged about gains in consolidated cash flow (up 4.8% to $7.4 billion) and cable segment cash flow (up 6.5% to $5.6 billion).

Even more so, Comcast executives took pride in the company's stellar broadband, wireless and commercial services performance while downplaying their mounting losses on the video side of the business.


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On the broadband front, the cableco added 260,000 data customers in the spring quarter, easily beating analyst forecasts and up 49% from the 175,000 added a year ago. That made it Comcast's best second quarter for broadband gains in a decade. (We'll have more on the company's broadband results in a story tomorrow on our sister, Broadband World News.)

Moving to wireless, Comcast netted 204,000 Xfinity mobile customer lines, boosting its total to 780,000. As for commercial services, the company added 36,000 business customers, lifting its total to 2.2 million. Thanks in part to this increase, Comcast generated $1.8 billion in business services revenues, up 11% from a year ago and putting the company on track to clear the $7 billion revenue mark this year.

The biggest blot on Comcast's performance came from its long-time core business, video. The company shed 140,000 cable subscribers during the spring, an increase from the 93,000 it lost in the first quarter and its fifth straight quarterly decline. As a result, the MSO's video revenues slipped 1.6% to about $5.6 billion.

Roberts and his team blamed the higher video sub losses on competition from leading OTT video players like Netflix and Amazon Prime and virtual MVPDs (multichannel video programming distributors) like DirecTV Now and Sling TV. But even here they see a silver lining, arguing that increased streaming relies on greater broadband use.

“We’re benefiting more from that competition than we’re losing,” Roberts said. “Why is that? Because video over the Internet is more reliable, offers more devices and more bits per consumer and more bits per home. All those are great trends for us."

— Alan Breznick, Cable/Video Practice Leader, Light Reading

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Phil_Britt
Phil_Britt
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