Thursday, April 30, 2009

Comcast Advances After Profit, Sales Top Estimates

Comcast Corp., the largest U.S. cable company, rose as much as 7 percent in Nasdaq trading after posting first-quarter profit that beat analysts’ estimates, helped by customer gains capital spending reductions.

Excluding some costs, profit was 27 cents, topping the 23- cent average of estimates compiled by Bloomberg. Comcast added 837,000 net new customers for Internet, phone and digital TV, compared with the 660,000 estimate of Jonathan Atkin, a San Francisco-based analyst with RBC Capital Markets.

Chief Executive Officer Brian Roberts is offering more discounted packages of television and Internet to win customers, fending off competition from phone and satellite providers and the increasing popularity of TV on the Web. Comcast cut capital expenditures by 19 percent, helping to almost double free cash flow.

“Comcast is in the very enviable position of having a very high quality plant that’s fully built out and where the capital required to support it is now falling dramatically,” said Craig Moffett, a New York-based analyst with Sanford C. Bernstein. He estimated free cash flow would advance 40 percent.

The shares rose 86 cents to $16.10 at 11:51 a.m. New York time in Nasdaq Stock Market trading, after earlier reaching $16.30.

Comcast didn’t repurchase any shares in the quarter or boost its dividend. The company may still make buybacks “from time to time,” Chief Financial Officer Michael Angelakis said on a conference call today.

Fending Off Recession

Comcast added 329,000 Internet customers and 288,000 digital-video subscribers in the quarter. The average monthly bill for video customers increased 8 percent to $115.27 as more users adopted services such as high-speed Internet access, elected to watch video on demand, and didn’t drop premium channels such as HBO or Showtime.

The company may withstand the recession as more people stay at home for their entertainment and prepare for the digital transition in June, Atkin said. He rates the stock “sector perform.”

Some viewers who have analog televisions won’t be able to receive programming after June 12, when broadcasters switch to digital signals under a mandate by the U.S. Federal Communications Commission. Those with a converter box, cable or satellite service, or digital sets won’t be affected.

Rising Sales

Net income rose 5.5 percent to $772 million, or 27 cents a share, from $732 million, or 24 cents, a year earlier, the Philadelphia-based company said today in a statement. Sales climbed 5.3 percent to $8.84 billion, also topping estimates.

The economy remains weak with high unemployment rates and slow housing starts, which may stunt customer growth, Angelakis said on the call. Comcast’s subscriber growth trailed off in March and April, he said. Comcast declined to give financial guidance for the year.

Yesterday, Time Warner Cable Inc., the second-largest U.S. cable provider, also posted subscriber gains that exceeded analysts’ projections. Like Comcast, the company pared capital expenses to help boost cash flow.

Both cable operators are facing increasing competition from TV services offered by phone carriers like Verizon Communications Inc. and AT&T Inc., the two largest phone companies in the U.S. New York-based Verizon added 299,000 subscribers for its FiOS television product last quarter, while AT&T’s U-verse service added 284,000 customers.