Comcast Looks Strong

At a time when most companies are revising down their annual outlook, Comcast (CMCSA) has already met their free cash flow target for the year in just three quarters.

Comcast’s reported Q3 revenues of $8.5 billion were marginally lower than the $8.6 billion the market expected and represented growth of 9% annually. Quarterly EPS of $0.24 exceeded the market’s expectations of $0.22 and grew by 33% over the year.

By segment, Cable revenue grew by 7% over the year to $8.1 billion, driven by High-speed Internet growth of 9%, Phone revenue growth of 44% and Video revenue growth of 4%. The Business Services group grew by 42% over the year to $0.15 billion. Programming revenues increased by 11% over the year and, as in the previous quarter, advertising revenues were down by 10%.

During the quarter, Comcast repurchased $800 million worth of shares.

Comcast is now focusing on efficiency improvement and cost control measures and did not announce any further acquisitions after last quarter’s buying spree.

However, the expense control measures are not hindering their technology innovation attempts. They are expanding their VOD offerings and are adding more high-definition channels: they now have over 1,000 HD choices on VOD. They are also introducing TiVo beyond the Boston market. Their digital delivery plans continue to deliver good results, and they introduced wideband with the DOCSIS 3.0 (their very high-speed Internet service) rollout, which will enable them to compete with DSL offerings and reclaim bandwidth in a cost-efficient way.

In some other operating metrics, in Video, Comcast continues to manage well with digital penetration at 70%; the company added over 300,000 advanced services customers during the quarter. Demand for their phone service from new customers had sell-in rates at 40%.

In view of the recession, Comcast is rolling out products with more attractive price packages. They are hopeful that the recession will lead to people wanting to watch television and be connected, and as long as they are able to offer a suitably priced product, they believe demand will continue to grow. They did, however, mention that they were wary of AT&T and Verizon’s competitive strength.

The stock is currently trading at $17.66, having recovered from the five-year low of $12.50 it had reached earlier last month. It may be the right time to buy the stock, especially since the market has started showing some signs of stabilizing. President Obama has now been factored into the news, and the political uncertainty, at least, will be over by tomorrow.