A month has gone by since the last earnings report for Comcast (CMCSA). Shares have added about 5.2% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Comcast due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Comcast Q1 Earnings Beat Estimates, Revenues Miss
Comcast reported first-quarter 2020 adjusted earnings of 71 cents per share, beating the Zacks Consensus Estimate by 2.9% but decreasing 6.6% year over year.
Consolidated revenues slid 0.9% year over year to $26.61 billion and also missed the Zacks Consensus Estimate of $26.84 billion.
Cable Communication Revenue Details
Revenues climbed 4.5% from the year-ago quarter to $14.92 billion. Total Customer Relationships increased 371K to 31.9 million.
High-speed Internet revenues grew 9.3% year over year to $5 billion, primarily driven by increased residential high-speed Internet customers and rate adjustments. Total high-speed Internet customer net additions were 477K.
Business Services revenues were up 8% to $2.04 billion, driven by customer base expansion and higher average rates.
Wireless revenues jumped 52.1% to $343 million, supported by an increase in the number of customer lines. Comcast added 216K wireless lines in the reported quarter.
Advertising revenues inched up 0.3% to $557 million, primarily on solid political advertising revenues, offset by lower advertiser spending due to COVID-19. Excluding political revenues, advertising revenues declined 4.6%.
Voice revenues were $899 million, down 9.2% year over year due to a declining number of residential voice customers.
Video revenues slipped 0.1% to $5.63 billion, reflecting a decline in the residential video customer count.
Total video customer net losses were 409K while total voice customer net losses were 89K.
Other revenues increased 7% from the year-ago quarter to $443 million owing to higher security and automation services revenues as well as from licensing Comcast’s X1 and technology platforms.
NBCUniversal Revenues Decrease Y/Y
Revenues declined 7% year over year to $7.73 billion.
Cable Networks’ revenues dipped 0.3% from the year-ago quarter to $2.89 billion, primarily due to lower advertising revenues (down 2.2%) and distribution revenues (down 1.5%).
The year-over-year fall in advertising revenues reflects audience rating declines and reduced advertiser spending due to postponement of sports events in the wake of the COVID-19 pandemic.
Content licensing & other revenues increased 13% year over year.
Broadcast Television revenues improved 8.8% from the year-ago quarter to $2.68 billion, courtesy of higher content licensing revenues (up 31.3%) and distribution & other revenues (up 6.9%). Advertising revenues were flat on a year-over-year basis.
Filmed Entertainment revenues decreased 22.5% from the year-ago quarter to $1.56 billion. Theatrical revenues fell 28.8% from the year-ago quarter. Content licensing revenues dropped 15.4% on a year-over-year basis.
Theme Parks revenues were $869 million, down 31.9% year over year, primarily due to the closures of Universal Studios Japan in late February and Universal Orlando Resort and Universal Studios Hollywood in mid-March as a result of COVID-19.
Sky Revenue Details
Sky’s pro-forma revenues deteriorated 5.8% year over year to $4.52 billion. At constant currency (cc), revenues softened 3.7%.
Direct-to-consumer revenues were down 4% (down 1.9% at cc) from the year-ago quarter to $3.68 billion. This decline primarily reflected a decrease in average revenue per customer relationship due to the impact of COVID-19, which resulted in lower sports subscription revenues.
Content revenues fell 12.3% (down 10.5% at cc) to $325 million. This downside reflects the deferral of wholesale revenues from sports programming due to suspension of sports events following the COVID-19 outbreak.
Advertising revenues deteriorated 13.5% (down 11.6% at cc) from the year-ago quarter to $513 million, primarily due to overall market weakness, which worsened due to COVID-19 as well as the impact of a change in legislation related to gambling advertisements in the U.K. and Italy.
Pro-forma Total Customer Relationships decreased 65K to 23.9 million in the reported quarter.
Consolidated programming & production costs slipped 3.1% from the year-ago quarter to $8.30 billion. As a percentage of revenues, programming & production costs shrank 70 basis points (bps) on a year-over-year basis to 31.2%.
Consolidated adjusted EBITDA fell 4.9% from the year-ago quarter to $8.13 billion.
Segment-wise, Cable Communications’ adjusted EBITDA rose 6.1% from the year-ago quarter to $6.08 billion. Cable Communications operating expenses inched up 3.4% year over year on higher non-programming costs, technical and product support expenses and other expenses including a spike in administrative expenses.
Cable Communications results include a loss of $59 million from the wireless business compared with a loss of $103 million in the year-ago quarter.
NBCUniversal’s adjusted EBITDA decreased 25.3% from the year-ago quarter to $1.75 billion, reflecting a decline in Cable Networks (down 1.2%), Filmed Entertainment (down 70.9%) and Theme Parks (down 84.7%)-adjusted EBITDA. Broadcast Television-adjusted EBITDA increased 29.6% year over year.
Sky’s adjusted EBITDA declined 16.9% year over year (down 15.3% at cc) to $551 million. Notably, Sky’s operating costs and expenses fell 4.1% (down 1.9% at cc) to $3.97 billion.
Consolidated operating income declined 6.4% year over year to $4.85 billion. Moreover, operating margin contracted 110 bps from the year-ago quarter to 18.2%.
Cash Flow & Liquidity
As of Mar 31, 2020, cash and cash equivalents were $8.52 billion, up from $5.50 billion as of Dec 31, 2019.
Moreover, as of Mar 31, 2020, consolidated total debt was $103.58 billion, up from $102.22 billion as of Dec 31, 2019.
In first-quarter 2020, Comcast generated cash from operations of $5.82 billion, down 19.5% year over year.
Capital expenditures were down 10.1% to $1.9 billion. NBCUniversal’s capital expenditures decreased 6.9% to $1.3 billion. Sky reported capital expenditures of $197 million, down 24.1%. Moreover, Cable Communications’ capital expenditures decreased 6.9% to $1.3 billion.
Free cash flow was $3.33 billion in the reported quarter, down 27.6% year over year.
Dividends paid out in the first quarter were worth $977 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted -10.13% due to these changes.
At this time, Comcast has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Comcast has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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