Comcast Corp.(CMCSA) reported excellent first quarter 2011 financial results, where both the earnings per share (EPS) and revenues exceeded the Zacks Consensus Estimate. This fabulous performance was primarily attributed to higher broadband subscriber additions and increased advertising revenue from NBC Universal, where Comcast holds a controlling stake since January 2011.
First Quarter Highlights
Total revenue in the first quarter was $12,128 million, up 31.8% year over year. Total revenue handily beat the Zacks Consensus Estimate of $11,077 million. Both cable communication and advertising witnessed significant revenue upside in the quarter.
GAAP net income for the first quarter of 2011 was $943 million or 34 cents per share compared with a net income of $866 million or 31 cents per share in the prior-year quarter. Adjusted (excluding special items) EPS in the reported quarter was 36 cents, which edged out the Zacks Consensus Estimate of 35 cents.
Quarterly operating costs and expenses were $8,062 million, up 43% year over year. Quarterly operating income came in at $2,224 million, up 15% year over year. Operating margin in the first quarter of 2011 was 18.3% compared with 21% in the prior-year quarter.
Agreements of Analysts
Of the 23 analysts covering the stock in last 7 days, 9 analysts upwardly revised their estimates for the second quarter of 2011, while none revised it downward for the same period. Similarly, for the third quarter of 2011, 7 analysts increased their estimates, while only 1 analyst revised its estimate downward.
For fiscal 2011, out of the 25 analysts, 8 raised their estimates, while 2 decreased their estimates. For fiscal 2012, out of 21 analysts, 10 revised their estimates upward, while 1 moved in the opposite direction.
We believe the positive sentiment results from the recent merger with NBC Universal coupled with higher advertising revenue and increased customer additions.
Currently, the Zacks Consensus EPS Estimate for the second quarter of 2011 is pegged at 40 cents per share. The projected annual growth rate is 22.4%. Similarly, for the third quarter, the current Zacks Consensus EPS Estimate of 39 cents per share indicates a gain of 22.73% year over year.
Magnitude of Estimate Revisions
In synergy with the upward revision of estimates during the last 7 days, the current Zacks Consensus Estimate inched up by 1 cent from 39 cents to 40 cents for the second quarter of 2011. Similarly, for the third quarter of 2011, the current Zacks Consensus Estimate increased by a penny from 38 cents to 39 cents for the same period.
For fiscal 2011, the Zacks Consensus Estimate jumped 4 cents from $1.52 to $1.56, in the last 7 days. Likewise, for fiscal 2012, the Zacks Consensus Estimate increased 7 cents, from $1.75 to $1.82, in the same period.
Earning Surprises
With respect to earnings surprises, the company’s consistent track record in the last four quarters is expected to persist in the upcoming quarters. Comcast produced an earnings surprise of 2 cent or 5.88% in the last quarter. The ongoing quarter and the next quarter reflects an upside potential (essentially a proxy for future earning surprises) of 2.50% and 2.56%, respectively, while fiscal 2011 and 2012 contains 1.28% and 1.65% upside potential, respectively.
Our Recommendation
Comcast is all set to become a media powerhouse armed with its unique control over both content and distribution after completing the acquisition of a controlling stake in NBC Universal. The company is also aggressively deploying the DOCSIS 3.0 (also called Wideband) technology to upgrade its existing customers to high-speed network together with all digital networks.
However, we believe that Comcast is fairly valued at current levels as the stock price witnessed a significant surge (up 56%) last year. Moreover,stiff competition from formidable rivals like Time Warner Cable(TWC) and other satellite operators like DIRECTV (DTV) and DISH Network Corporation (DISH) will most likely affect Comcast going forward.
We maintain our long-term Neutral recommendation on Comcast. Currently, Comcast has a Zacks #3 Rank, implying a short-term Hold rating on the stock.
COMCAST CORP A (CMCSA): Free Stock Analysis Report
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