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Comcast Continues Upward Trend

Posted on Monday, May 5th 2008

I had mentioned in January that it was time to buy Comcast. In April, their Q4 results followed my predicted path and this week as they announced their Q1 results, the trend continued.

Comcast’s (CMCSA) Q1 2008 revenues of $8.39 billion reported a 14% increase over the year and beat the street’s views of $8.0 billion. Their earnings for the quarter met market expectations at $0.19 per share, registering a 12% increase over the previous year.

During the quarter, they repurchased 2% of their shares at $1 billion and paid out their first dividend of $0.19 million or $0.0625 per share.

Segment wise, for the quarter, video revenue was $4.71 billion, registering a 4.8% growth over the year. High Speed internet revenue of $1.75 billion grew by 11.5% for the year. Phone services grew substantially by 64.9% to $0.59 billion. Advertising revenues at $0.34 billion recorded a 6.8% growth, other sources and franchisee fees together contributed $0.53 billion to the quarter growing by 11.6% in the year. Programming revenues increased by 20.2% to $0.36 billion.

Going forward, the company stood by its previous view of revenue and earnings growth of 8-10% for the year.

In some of their key metrics, programming division’s OCF increased by 76% to $113 million. They added 494,000 digital subscribers compared to 658,000 added last year. Their voice services registered 639,000 new customers. High speed internet recorded 492,000 new customers; down 16% for the year and 68% of these were converts from their DSL client base. All their efforts are reflected in the increase in ARPU going up to $107 compared to $87 a year ago and $102 a quarter ago for cable.

The management is focusing this year on bandwidth reclamation through converting all users to a digital platform. They view the reduction of their basic subscribers by 57,000 as a step towards this direction.

I had highlighted poor customer support as a gap in their services. They seem to be taking steps to improve that. The company blames part of the support related issues to the work volumes and has hired 15,000 employees and made changes in their internal operations to handle that. They have noticed reduction in their contact rates and churn.

What they still don’t seem to be doing is acquisitions. Their last acquisition was Comcast should look at building a position in Travel and Shopping, two large lifestyle oriented web verticals.

The stock is currently trading at $21.97.

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