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Will Internet User Growth Aid Comcast (CMCSA) Q4 Earnings?

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Comcast Corp (CMCSA - Free Report) is set to report fourth-quarter 2018 results on Jan 23.

In the trailing four quarters, the company delivered average positive earnings surprise of 5.6%, beating estimates in each. In the last reported quarter, the company’s adjusted earnings of 65 cents per share outpaced the Zacks Consensus Estimate by four cents.

Moreover, Comcast’s top line has beaten the consensus mark in two of the trailing four quarters. In second-quarter 2018, revenues increased 5% year over year to $22.14 billion and beat the Zacks Consensus Estimate of $21.75 billion.

The Zacks Consensus Estimate for third-quarter revenues is $25.74 billion, which reflects year-over-year growth of almost 17.5%. Moreover, the consensus mark for earnings has been steady at 62 cents over the past seven days.
 

 

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

Factors to Watch Out

Comcast is expected to benefit from an increasing number of high-speed internet subscribers. The company has completed rollout of its high-speed gigabit internet service to nearly all 58 million homes and businesses it serves.

Notably, total high-speed Internet customer net additions were 334K in third-quarter 2018. Additionally, high-speed Internet revenues increased 9.6% year over year to $4.32 billion.

Comcast’s strategy to market broadband-only packages to customers is likely to drive top-line growth. Further, expanding Wi-Fi coverage along with innovative xFi control features is improving customer experience.

Moreover, the company’s Xfinity Mobile is now used by more than one million customers. Per Comcast, addition of mobile service improves broadband retention rate, which is a key catalyst. At the end of the third quarter, 68% of Comcast’s residential customers received at least two Xfinity products.

Further, growing subscriber base for the X1 platform, addition of new features like the voice remote and Fandango voice activated movie ticketing service, and integration of YouTube, Pandora and Netflix are positives.

Moreover, NBC Universal’s strong content portfolio is likely to drive growth. Additionally, strong political advertising sales are expected to drive advertising revenues.

Nevertheless, Comcast continues to lose video subscribers due to cord-cutting and stiff competition from virtual MVPDs. Weakness in the Theme Park business is a headwind.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) along with a positive Earnings ESP has a good chance of beating estimates. The Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.

Comcast has a Zacks Rank #3 and an Earnings ESP of -1.08%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

Here are a few companies you may want to consider as our model shows that these have the right combination of elements to post earnings beat in their upcoming releases:

Electronic Arts (EA - Free Report) has an Earnings ESP of +3.64% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.    

Rogers Communications (RCI - Free Report) has a Zacks Rank #3 and an Earnings ESP of +0.75%.

Roku (ROKU - Free Report) has an Earnings ESP of +16.67% and a Zacks Rank #3.

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