On Mar 5, 2014, we issued an updated research report on Comcast Corporation (CMCSA) – the largest cable MSO in the U.S. The company’s Cable business continues to perform well and the NBC Universal segment is witnessing improvement. Moreover, launch of innovative services have resulted in video subscriber additions, after a gap of 26 quarters.
Except for the last quarter, Comcast has delivered positive earnings surprise in the remaining three quarters last year, with an average beat of 3.16%. The company reported mixed financial results for the fourth quarter of fiscal 2013 with the bottom line beat the Zacks Consensus Estimate while the top line missed the same.
Comcast has reached an agreement to acquire the second largest cable MSO (multi-service operator) in the U.S. – Time Warner Cable (TWC). The deal is expected to close within a year, subject to regulatory approval and approvals of the shareholders of both the companies. Comcast is expected to derive a significant $1.5 billion of operating synergy from this merger of which 50% may be realized within the first year of the merger.
Comcast intends to enhance its offerings with the nationwide rollout of X1 services, various home security services and introduction of contents for multi-platform on-demand services. The next-generation Web-capable platform, X1 offers a hybrid IP/QAM video gateway with an advanced user interface and the ability to port third-party apps that tie into a cloud-based infrastructure. The upcoming X2 service is software update over X1. This new service is a cloud-based TV guide and also includes recommended web videos and a new mobile application.
However, a major concern for the pay-TV industry is the prolonged macroeconomic fluctuations in the U.S. Moreover, there is little scope for growth in the digital video customer base in the U.S. In addition, availability of low-cost video streaming services from the likes of Netflix Inc. (NFLX), Google Inc.’s (GOOG) YouTube and Hulu continue to pose significant threat to the cable MSOs.
Currently, Comcast Corporation carries a Zacks Rank #3 (Hold).
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