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Comcast (CMCSA) to Report Q4 Earnings: What's in Store?

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Comcast Corp. (CMCSA - Free Report) is scheduled to release fourth-quarter 2017 results on Jan 24, before the opening bell.

The company’s bottom line met the Zacks Consensus Estimate in each of the trailing four quarters, the average beat being 9.30%.

Let’s see how things are shaping up prior to this announcement.

Factors at Play

Comcast operates in a highly competitive U.S. cable TV market with incumbents like AT&T Inc. (T - Free Report) , Charter Communications Inc. (CHTR - Free Report) and Altice USA Inc. (ATUS - Free Report) . Cord-cutting due to severe competitive threat from low-cost online video streaming operators is the major problem for legacy pay-TV operators.

Comcast has started the nationwide rollout of the DOCSIS 3.1 technology, with its latest xFi Advanced Gateway. Upgrading to DOCSIS 3.1 will enable Comcast to compete against AT&T’s ongoing Fiber-to-the-Home (FTTH) program. We believe that DOCSIS 3.1 and Gigabit Pro rollout is slated to drive prospects.

Further, the company completed the nationwide rollout of its wireless services under the Xfinity Mobile brand, with plans to include YouTube in its X1 video platform. Based on a Mobile Virtual Network Operator agreement with Verizon, Xfinity Mobile will be using Verizon's 4G LTE wireless network. Xfinity Mobile is expected to be the nation’s first wireless service combining the nation’s largest and most reliable 4G LTE network with 18 million Xfinity Wi-Fi hotspots to deliver a great wireless experience, which is cost effective.

Earlier, on May 8, 2017, Comcast and Charter Communications announced their joint wireless venture in order to better explore their opportunities, and accelerate and enhance each other’s ability to participate in the national wireless marketplace. The company also bought $1.7 billion in wireless spectrum at a Federal Communications Commission’s Incentive auction in April 2017 to bolster its wireless services.

Comcast has started deploying fiber-based 2 Gbps residential broadband Internet services in certain regions. Known as Gigabit Pro, this new service runs on FTTH technology. Comcast Business recently announced the launch of DOCSIS 3.1-based internet service to business customers. Business Services has been witnessing strong momentum and continues to represent an attractive growth opportunity for the company.

Buoyed by such tailwinds, Comcast’s shares have rallied 15.58%, surpassing the industry’s growth of 6.53% over the past three months.


 

On the other hand, over the last six-seven years, the internal dynamics of the U.S. pay-TV industry have been gradually shifting from cable TV operators to low-cost over-the-top service providers. Strong presence of online video streaming providers such as Netflix Inc., Hulu.com, YouTube etc., have posed severe threat to cable TV operators. Comcast lost 94,000 voice customers and 125,000 video customers in third-quarter 2017.

Recently, Comcast has been slapped with patent infringement charges by TiVo in relation to its X1 platform. The suit claims that Comcast’s X1 set-top boxes are infringing on at least eight of the patents, which are held by Rovi Corp. Notably, this is not the first time that the companies have been engaged in such legal brawls. In November 2017, the ITC had ordered an import ban on Comcast’s X1 boxes for violating two of TiVo’s patents.

Moreover, NBC Universal’s success is contingent on consumer acceptance of its content, and its businesses may be unfavorably affected if its content fails to attain adequate consumer acceptance or the costs to produce or acquire content increase. Moreover, the loss of NBC Universal’s programming distribution agreements, or the renewal of these agreements on less favorable terms, could affect its businesses.

Earnings Whispers

Our proven model does not conclusively show that Comcast is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here as elaborated below.

Zacks ESP: Comcast has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 47 cents. You can uncover the best stocks to buy or sell before they’re reported with the Earnings ESP Filter.

Zacks Rank: Comcast has a Zacks Rank #3 which increases the predictive power of ESP. However, the company’s 0.00% ESP makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 (Sell) or #5 going into the earnings announcement, especially when the company has not witnessed any estimate revisions.

Comcast Corporation Price and EPS Surprise

Key Pick

Rogers Communications Inc. (RCI - Free Report) has the right combination of elements to post an earnings beat when it posts fourth-quarter 2017 results on Jan 25. It has an Earnings ESP of +0.37% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The company’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with an average beat of 6.04%.

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