Comcast Corporation (NASDAQ:CMCSA) is set to report second-quarter 2018 results on Jul 26.
In the trailing four quarters, the company delivered an average positive earnings surprise of 5.95%, beating estimates in each. In the last reported quarter, the company’s adjusted earnings outpaced the Zacks Consensus Estimate by three cents.
Moreover, Comcast’s top line has beaten the consensus mark in three of the trailing four quarters. In the last quarter, revenues came in at $22.79 billion, beating the Zacks Consensus Estimate of $22.72 billion and increased 10.7% from the year-ago quarter.
Let’s see how things are shaping up prior to this announcement.
Comcast Corporation Price and EPS Surprise
Comcast Fights for Sky, Drops Bid for Fox Assets
Comcast had a dramatic last quarter. In late April, the cable giant submitted a £22 billion ($30.7 billion) bid for 61% stake of the European Pay-TV, Sky Plc, which was better than Twenty-First Century Fox’s (NASDAQ:FOXA) December 2017 offer.
Further, in mid-June, Comcast submitted a higher bid of $65 billion for Fox’s film and television assets, which was a 19% premium to Disney’s (NYSE:DIS) $52.4 billion offer. However, on Jun 20, Disney sweetened its offer to $71.3 billion that Fox readily accepted.
Disney further got an edge over Comcast after it secured U.S. DOJ approval for Fox’s assets. Comcast recently dropped the bid for Fox’s assets.
However, the fight for Sky is expected to continue between Comcast and Fox, as both the parties sweetened their bids recently.
Notably, Comcast has lost 14.3% on a year-to-date basis, as compared with the industry’s decline of 15.5%.
Increasing Competition to Hurt
We remain concerned about the company’s operation in a saturated and competitive multi-channel U.S. video market. Additionally, the company’s high-debt level, which is likely to increase further due to the higher acquisition price for Sky, is a headwind.
However, Comcast is benefiting from an increasing number of high-speed internet subscribers. The company’s broadband penetration currently stands at 45%.
Moreover, the company has completed the nationwide rollout of its wireless services under the Xfinity Mobile brand, which is expected to expand subscriber base. Strong adoption of Xfinity Home is a key catalyst. At the end of the first quarter, 69.3% of Comcast’s residential customers received at least two Xfinity products.
Further, the company continues to add new features like the voice remote, and has integrated YouTube, Pandora and iHeartRadio. These features are likely to improve customer engagement, consequently benefiting top-line growth.
Moreover, Comcast’s strategy of consistent investment in new attractions at the company’s theme parks is expected to drive growth for NBCUniversal in the to-be-reported quarter.
What Our Model Says
According to the Zacks model, a company with Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) along with a positive Earnings ESP has a good chance of beating estimates. The Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.
Comcast has a Zacks Rank #3 and an Earnings ESP of -0.17%, which indicates an unlikely positive surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
A Stock to Consider
Here is a stock you may consider as our proven model shows that it has the right combination of elements to post an earnings beat this quarter.
AMC Networks (NASDAQ:AMCX) has an Earnings ESP of +0.43% and a Zacks Rank #1. The company is set to report on Aug 2.
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