Comcast Earnings Reflect Industry Changes

Reviewed: May 20, 2015
By FinanceWeb

The shape of the cable industry continues to change as there are greater consumer demands for higher speeds, more extensive menus, and lower costs. Comcast reported for the first time that the number of cable subscribers fell below the number of Internet subscribers. At 22 million subscribers, more customers have the Internet than cable. This shift is consistent with the increase in online entertainment services that offer less than Cable but at lower overall costs.

Earnings Exceed Estimates Again

For the seventh time in the past nine quarters, Comcast’s earning exceeded estimates. This report at $0.79 per share exceeded the estimated earnings by five cents per share. The stock trades at about $58.50 per share and more significantly, Comcast announced it would increase its stock buyback to $6.76 billion this year. On a year to date basis, the stock has underperformed the S&P 500. The index sits at 2.7 percent increase while Comcast shares have grown 1.3 percent.

Many Revenue Streams and Varied Results

The NBCUniversal group including TV and Movie brands showed a sales decline of four percent to a still healthy $6.6 Billion. Including theme parks and event broadcasts like the SuperBowl and the Olympics, this overall drop was due to lower ratings. The film group showed an increase, and one bright spot was a top grossing film Fifty Shades of Gray. The NBC group raised rates charged to TV distributors to play its content. Its theme parks revenue increased led by the Harry Potter theme.

Broadband Declines

Broadband customers fell due to competition from online services such as Netflix. Comcast lost a net of 8,000 cable subscribers. The average cable bill rose about five percent to approximately $140.00 per month. Comcast plans to add more cable subscribers. It has some powerful potential assets to apply to the effort as it rolls out the top speeds in the market this calendar year to compete with AT&T and Google Fiber.

Future Expansion Options

The company dropped its planned acquisition of the number two cable provider, Time-Warner. The planned acquisition would have cost $45.2 billion but would have created a thorough saturation of major US markets and reduced competition in many of those markets. Comcast concluded that the Department of Justice, SEC, and FCC regulators would not have approved the purchase. Future options for growth include acquiring more European programming for its cable networks. It also has am impressive number of urban hotspots that could support a mobile telephone entry and cross-market its streaming programming assets.

The Speed Game

Competitors including Google Fiber and AT&T U-verse have rolled out technology and hardware advances to increase speeds to one Gigabit. Comcast has technological advances in its arsenal and can use them to attract new customers. Higher speeds improve the customer experience for all of the cable and Internet-based services including cable-Internet-telephone service packages. There are under served markets across the US and an opportunity to expand the subscriber base by deploying into areas with little or no existing services.