Comcast Exceeds Zacks Estimates

Comcast Corp. (CMCSA) reported second quarter 2010 financial results, which exceeded the Zacks Consensus Estimates. Adjusted EPS in the reported quarter was 33 cents compared with 29 cents in the prior-year quarter.

Adjusted EPS included $22 million in operating expense, $2 million of interest expense and $35 million of other expense related to the NBC Universal Transaction. Adjusted EPS exceeds the Zacks Consensus Estimate of 32 cents. Better-than-expected results were due to solid customer growth and an improving advertising market.

GAAP net income was $884 million or 31 cents per share, compared with $967 million or 33 cents per share in the prior-year quarter. The decline was due to the expenses related to its highly anticipated acquisition of NBC Universal.

Revenue

Second quarter 2010 total revenue was $9,525 million, up 6.1% year over year. This was also better than the Zacks Consensus Estimate of $9,269 million. Advertising revenues rebounded in the quarter with a 23% year-over-year growth.

Margins

Operating margin was 21.8% compared with 20.9% in the year-ago quarter. Operating income upped 10.9% year over year to $2.1 billion, attributable to solid operating results in the Cable and Programming segments, partially offset by $22 million of NBC Universal-related transaction costs in the reported quarter.

Share Repurchase and Dividend

During the quarter, Comcast repurchased 17.3 million of its common shares for $300 million. As of June 30, 2010, Comcast had approximately $2.7 billion of availability remaining under its share repurchase authorization. Comcast also paid cash dividends totaling $267 million.

Balance Sheet and Cash Flow

Cash and marketable securities at the end of the quarter totaled $10,179 million, compared with just $6,668 million at the end of fiscal 2009. Total debt at the end of the reported quarter was approximately $30.99 billion, compared with $29.1 billion at the end of fiscal 2009.

Excluding the impact of economic stimulus packages, free cash flow was $1,355 million compared with $1,170 million during the prior-year quarter. At the end of the quarter, debt-to-capitalization ratio was 0.40,which remains same to that of the end of fiscal 2009.

During the first half of 2010, Comcast generated more than $5.3 billion of cash from operations compared with $5.1 billion in the year-ago period. Free cash flow was nearly $3.3 billion compared with $2.8 billion in the year-ago period.

Cable Segment

Revenues from the Cable segment were $8,949 million, up 5.1% year over year. Operating cash flow from this segment was $3,698 million, up 5.7% year over year. At the end of the second quarter 2010, Comcast had 16,448 million (up 7.3% year over year) High-Speed Internet customers; 8,125 million (up 16.0% year over year) Voice customers; 23,212 million (down 2.8% year over year) Video customers; and 19,237 million (up 9.7% year over year) Digital Video customers.

Programming Segment

Revenues from the Programming segment summed up to $454 million, up 18.1% year over year. This was mainly due to higher affiliate and advertising revenues. Operating cash flow from this segment was $152 million, up 34.4% year over year.

Corporate & Other Segment

Revenues from the Corporate & Other segment were $122 million, up 62.8% year over year. Operating cash flow from this segment was a loss of $113 million in the quarter, compared with a loss of $77 million in the year-ago quarter.

We maintain our Neutral recommendation on Comcast. It is currently a Zacks #3 Rank Hold Stock.

Read the full analyst report on CMCSA