The long-term outlook for cable companies like Comcast Corporation (NASDAQ:CMCSA) isn’t all that bright, but the short-term prognosis for CMCSA is at least OK, thanks to solid quarterly Comcast earnings.
Cable companies are under threat from cord-cutting and the push toward a la carte viewing. Indeed, the secular trend in viewing habits puts the viability of the entire industry in doubt.
However, that’s a process that will take quite some time to play out, and in the meantime, Comcast stock could keep puttering along with in-line performance and a decent dividend.
CMCSA is up 2% for the year-to-date, trailing the S&P 500 by less than a percentage point. Its performance pretty much matches the broader market over the last 52 weeks as well.
Anyone holding Comcast stock was probably hoping that a big merger could boost earnings and get CMCSA to ease into a market-beating trajectory, but that outcome is now very much in doubt.
CMCSA’s $45 billion deal for Time Warner Cable Inc (NYSE:TWC) has been under regulatory scrutiny for almost a year now. The longer these things take, the higher the risk federal watchdogs will scuttle them. Indeed, by one calculation, the odds of the deal going through are now just 60%.
Happily for anyone holding CMCSA , the market doesn’t look particularly worried about the deal. Comcast stock rose as much as 1.9% in early trading even after missing Wall Street’s profit forecast.
CMCSA Rises on Dividend Hike, Stock Buyback
For the final quarter of 2014, Comcast earnings came to 77 cents a share on an adjusted basis, but the Street was looking for 78 cents.
Revenue, however, grew nearly 5% to $17.7 billion versus last year, which was ahead of forecast. The Winter Olympics largely drove the revenue beat. The Sochi Games added $1.1 billion to the top line.
NBC Universal chipped in moderately, with a revenue gain of 2.3%. Theme parks and broadcast television revenue were partially offset by lower receipts from filmed entertainment, which slipped on lower top-line results in home entertainment. Operating cash flow from the business rose almost 7% to $1.4 billion.
Although there wasn’t much in the CMCSA earnings report to justify the share price reaction, some financial engineering more than made up for that.
CMCSA hiked its dividend by 11% to 25 cents a quarter, or $1 a year. Additionally — in one of the market’s favorite moves — CMCSA added $10 billion to its share repurchase program in 2015. If nothing else, returning cash to shareholders keep them happy and supports Comcast stock. In 2014, taken together, dividends and share repurchases grew 64% to $6.5 billion last year.
Although the Time Warner Cable deal remains stuck in regulatory limbo — and the long-term prospects for cable are eroding — CMCSA looks like it can plod along with its market-tracking ways.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.
