Quarterly earnings can be cause for anticipation or anxiety, depending upon the target company’s performance. But for Comcast (NASDAQ:CMCSA), it’s a healthy serving of both plates. With a failure to secure a major deal, investors are looking for the upcoming Comcast earnings report to provide guidance. But they could also find some unfavorable components.
Obviously, the biggest talking point surrounding CMCSA is its concession to rival media-entertainment firm Walt Disney (NYSE:DIS). For several months, the two industry titans exchanged heated words in their bid for Twenty-First Century Fox (NASDAQ:FOXA) entertainment assets. At stake was everything that made Fox great — lucrative movie and TV franchises — and none of the filler, like Fox Sports or Fox News.
In the era of cord-cutting, it’s imperative for traditional entertainment powerhouses to gain any advantage. That’s why both Comcast and Disney were willing to explode their debt profile for Fox. This was especially true for Comcast, which placed an all-cash bid. Disney upped the ante, offering a 50/50 split between cash and stock, which Fox enthusiastically accepted.
Although Comcast’s concession letter struck a congratulatory tone, the news sharply disappointed. As I argued just recently, Disney now has an entertainment portfolio that could prove to be near-invincible. This is especially the case because of the changing consumer trends at the box office: the only consistently-popular and profitable movies are based on sci-fi or comic-book franchises, genres in which Disney now levers a virtual monopoly.
Heading into the Comcast earnings report, CMCSA was down 0.4%. For the year, shares have lost 14.4%.
But could an upside exist to losing out? Fellow InvestorPlace contributor Will Ashworth was critical of Comcast engaging in high-stakes bids. Indeed, Ashworth has criticized other similar, debt-heavy deals. Perhaps failing is a contrarian lift for Comcast earnings.
Q2 Comcast Earnings Report Raises Viability Questions
On the surface, the media giant seemingly has a straightforward road for its second-quarter fiscal 2018 report. Consensus estimates peg Comcast earnings per share at 60 cents.
In the year-ago quarter, CMCSA delivered an EPS of 52 cents, up 7.4% from the 48-cent consensus target. Should the company hit its estimate later this afternoon, it would represent 15% year-over-year growth, well inline with prior performances. Plus, the last time a Comcast earnings report missed EPS was in Q4 2015.
Adding to the optimist’s perspective is revenue growth. In Q1 2018, CMCSA brought in $22.8 billion in sales, up nearly 11% YOY. Last year, the company rang up $84.5 billion, up over 5% from 2016 results.
For Q2, analysts expect revenue to hit $21.8 billion, with estimates ranging from $21.4 billion to $22.1 billion. One year ago, the company registered $21.2 billion.
Despite beatable targets, Zacks Investment Research doubts that the upcoming Comcast earnings will deliver for shareholders. Primarily, they cite the ultra-competitive media landscape, where their competitors aren’t just traditional rivals like Disney, but also next-wave players like Netflix (NASDAQ:NFLX).
Moving forward, investors may not like Comcast’s aggressive push to acquire Sky (OTCMKTS:SKYAY). Securing that deal provides Comcast with valuable assets in the European market. However, it will skyrocket an already problematic debt load.
In my view, the Comcast earnings targets aren’t unreasonable; therefore, I wouldn’t be surprised if CMCSA beats EPS again. But the real question is guidance. I believe many shareholders want the company to exercise prudence. But after a high-profile defeat to Disney, Comcast is in no mood to back down from Sky.
That raises viability concerns if Comcast proves victorious.
The Bottom Line for Comcast Earnings
Although I lack a crystal ball, I fear that the Comcast earnings report will produce a “paper win.” That is to say, Comcast could win on both earnings and revenue expectations. But if CMCSA stock tanks, what good is it?
Let’s be real: the markets haven’t responded well to the company’s overtures for both Fox and Sky. Disney shares, while not a sterling example of high performance, is at least in positive territory for the year. CMCSA, as I mentioned earlier, is down double-digits.
It’s clear that shareholders are worried that Comcast is biting off more than it can chew. That concern becomes further amplified when you consider that streaming media is hurting traditional-content providers. The real benefactor is likely CMCSA contrarians, who might see a discounted opportunity soon.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.
“Financial Anomaly” to Trigger Windfall Profits
As you read this, a rare set of events has created what we believe will become one of the three biggest investment opportunities of your life, no matter when you were born.
This “financial anomaly” could a trigger a financial boom that will hand investors 10x gains … 20x gains … even some 50x gains.
This boom will take place in the legal marijuana business.
If you missed the opportunity to make 50 times your money in internet stocks … or if you missed out on the opportunity to make 50 times your money in bitcoin, you’re going to want to know exactly what’s going on here.
