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Expect Comcast Stock to Soar on Over-the-Top Q4 Results

CMCSA’s fourth-quarter results should see healthy increases on the top- and bottom-line

By Will Ashworth, InvestorPlace Contributor

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Comcast (NASDAQ:CMCSA) is expected to report its fourth-quarter earnings Wednesday morning before the markets open. If they’re anything like the company’s Q3 2018 results, Comcast stock is in for a good day.

What exactly should investors be looking for from Comcast’s final quarterly report of the fiscal year?

There’s the usual stuff like revenues, earnings, customer gains or losses, but there’s also a need to hear more about the company’s OTT plans as well as the speed at which it will deleverage a business that’s sitting on a powderkeg of debt.

Like all earnings reports, it’s more about the way in which it says stuff and less about the actual numbers, but I’ll provide those just the same.  

The Key Numbers for Comcast Stock

On the top line, analysts are expecting $26.5 billion in revenue, 21% higher than a year earlier and 20% higher sequentially from Q3 2018.

On the bottom line, analysts expect Comcast to earn 63 cents a share, 29% higher than Q4 2017, and 2 cents less than in the third quarter of this fiscal year.  

Over the past four quarters, Comcast has delivered positive earnings surprises of 4.3%, 5.1%, 8.3% and 6.6% in that order. This means the odds are good that it will also grow earnings-per-share on a sequential basis and not just year-over-year. I’d be shocked if it doesn’t maintain this momentum, especially considering analysts have been raising their 2019 earnings estimates.

The last set of numbers to keep an eye on is CMCSA’s subscriber growth or lack thereof.

On the plus side, Comcast grew its high-speed internet customers by 363,000 in the third quarter, bringing the total to 26.9 million customers. From a revenue perspective, it increased high-speed internet sales by 9.6% from a year earlier to $4.3 billion. I’d expect that number to rise in the fourth quarter given the company’s emphasis on broadband-only packages.

I guess we’ll see Wednesday morning.

A Deeper Dive Into CMCSA

Due to the Sky acquisition, which added $40 billion in debt, CMCSA will finish fiscal 2018 with approximately $115 billion in debt. That’s 3.6 times EBITDA. Only AT&T (NYSE:T) has more leverage among the leading media companies.

Comcast CFO Mike Cavanagh would like to see leverage drop by 40% to 2.2 times EBITDA within 24 months. Investors should look for anything in its earnings release or conference call that reaffirms this commitment because a recession could be upon us in 2020.

The other point of interest is NBCUniversal’s OTT plans.

In a recent Hollywood Reporter interview with NBCUniversal CEO Steve Burke, the chief executive stated that the company is working diligently to get its streaming strategy perfected. As part of this plan, NBCUniversal has brought in the technical team behind Now TV, Sky’s OTT platform in Europe that’s done very well.

Hopefully, Comcast’s conference call will mention these plans and how far they are from launching. Given the hyper-competitiveness of the industry, I doubt it will, but it’s something to look out for.

The Bottom Line on CMCSA Stock

The odds are good that Comcast is going to deliver positive results Wednesday morning.

The big issue for Comcast stock owners should be the company’s plans for 2019 and 2020 when it comes to debt repayment, subscriber growth and overall customer experience. The revenues and profits should take care of themselves.  

As of this writing Will Ashworth did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media, https://investorplace.com/2019/01/expect-comcast-stock-to-soar-on-over-the-top-q4-results/.

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