It’s a new era in media. Cord-cutting is the new trend for customers looking to save on their cable bills. And no longer is content considered king. That moniker belongs to cash and it should remain that way.
Comcast (CMCSA) has both cash and content, making CMCSA a tough name to bet against even as once-dominant media giants are threatened by cheaper alternatives from the likes of Netflix (NFLX) and, soon enough, if you believe the rumors, Apple (AAPL).
CMCSA Never Needed the TWC Deal
Monday, none of the trends or rumors mattered. CMCSA delivered a first-quarter profits of $2.06 billion. On a per-share basis, the Philadelphia-based median giant earned a profit of 81 cents. And when taking out one-time gains and costs, adjusted earnings came to 79 cents per share — enough for a 5-cent beat, according to consensus estimates.
For the quarter that ended March 31, the cable provider posted revenue of $17.85 billion, also exceeding analysts’ forecasts. Of course, if you’ve been following the headlines, you would think Comcast stock was worthless.
Comcast stock has traded relatively flat for most of 2015, including a 1% drop in just the past five days. It certainly hasn’t helped that the company’s merger bid for rival Time Warner Cable Inc. (TWC) was met with the FTC saying, more or less, “over my dead body.” It’s a deal that Comcast wanted. But it’s one I don’t think it needed.
Rightly or wrongly, Comcast was “forced” to withdraw its $45 billion offer. It was clear that federal regulators wanted no part of it. In short time, investors will be happy with that outcome, given that first-quarter revenues from cable customers climbed more than 6% year-over-year to $11.4 billion.
Not only that, CMCSA posted a 21% year-over-year increase in its business services revenue, reaching $1.1 billion. And when factoring the 11% jump in high-speed internet revenue to $3 billion, its best-performing quarter, the TWC deal would have been a disruption.
What’s more, in its high-speed internet segment, Comcast added more than 400,000 customers during the quarter, reaching a total of 22.37 million. In its voice segment, subscriber totals rose by 77,000. All told, its customer count from all of its services reached 27.2 million, up 199,000 year-over-year.
The quarter wasn’t flawless, however. The company’s NBCUniversal business posted first-quarter revenue of $6.6 billion, down 4% year-over-year. But in fairness, this was a tough year-over-year comparison for that segment. Recall that CMCSA had the benefit of 2014 Winter Olympics last year, which added $1.1 billion cable and broadcast revenues.
Factoring that out the gains from the Sochi olympics and removing the $376 million boost from the 2014 Super Bowl and first-quarter revenue from the NBCUniversal business would have been up 8% year-over-year.
Bottom Line for Comcast Stock
Essentially, CMCSA is operating on all cylinders. And with the company expanding its high-speed internet subscriptions, Comcast stock, which has gained more than 100% in the past three years and more than 200% in the past five, will continue to climb in the quarters ahead.
And Comcast, which during the quarter, paid almost $600 million in dividends and bought back 35.1 million of its stock, doesn’t need Time Warner Cable to return value to shareholders.
In short, CMCSA has a sound business and investors of Comcast stock will continue to be rewarded. With Comcast stock trading at around $59 and at a discounted P/E of 18, compared to a P/E of 21 for the S&P 500, these shares are a sure-bet to $66, posting roughly 13% gains from current levels.
Add in its $1 annual dividend, yielding 1.7%, Comcast stock offers excellent value.
As of this writing, Richard Saintvilus was long AAPL.
