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Here's Why Comcast (CMCSA) Stock Looks Like a Buy for Value Investors

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Shares of Comcast (CMCSA - Free Report) have climbed over 13% this year to outpace the S&P 500’s strong 2019 comeback. The cable and internet powerhouse is also coming off stronger-than-expected fourth quarter financial results, and Comcast is set to roll out its own streaming service as it expands its wireless phones unit. Coupled with Comcast’s solid value, CMCSA stock looks like a buy at the moment.

Overview

Comcast’s adjusted Q4 earnings surged over 36% to beat our Zacks Consensus Estimate. The company’s fourth-quarter revenue popped 5.2% to $28.28 billion, when factoring in the impact of its acquisition of pay-TV giant Sky PLC. Meanwhile, CMCSA’s consolidated revenues soared 26.1% to reach $27.85 billion.

The company’s cable communication revenue climbed 5.2% to $14.13 billion. Comcast, like its peers has seen thousands of customers cut the cord in favor of the likes of Netflix (NFLX - Free Report) and Amazon (AMZN - Free Report) Prime. The firm, however, lost fewer subscribers, 29,000, last quarter than the 33,000 it did in Q4 2017. Investors should also note that Comcast’s internet business looks poised to expand no matter what happens with traditional cable because streaming platforms need fast Wi-Fi and internet. CMCSA’s high-speed internet unit saw its revenue surge over 10% last quarter and add 351,000 customers.

Comcast’s NBCUniversal division revenue jumped 7.1%. The company also announced plans to roll out an ad-supported streaming platform that could help Comcast compete in a quickly growing streaming market that will soon include Apple (AAPL - Free Report) , AT&T (T - Free Report) , and Disney (DIS - Free Report) —soon to be boosted by its Twenty-First Century Fox purchase.

Another business that could bolster Comcast’s top and bottom lines down the road is its relatively new wireless unit known as Xfinity Mobile, which is still unprofitable. The unit added 227,000 total lines in Q4 to bring its total to 1.2 million.

 

 

Outlook

Looking ahead, Comcast’s current-quarter revenue is projected to surge 16.2% to reach $26.49 billion, based on our current Zacks Consensus Estimate. The company’s fiscal 2019 revenue is projected to expand by 15.3% to touch $108.99 billion.

At the bottom end of the income statement, Comcast’s adjusted quarterly earnings are projected to pop just 1.4%. With that said, CMCSA’s full-year EPS figure is expected to climb over 7%, with 2020’s earnings projected to jump roughly 11% above our current year estimate.

Valuation

The chart above shows us that Comcast stock has outperformed its industry’s average over the past five years. In fact, CMCSA stock is up 48%, which more than doubled the Media Market’s climb. At the same time, Comcast is trading at a discount to industry’s average.

CMCSA stock is trading at 13.9X forward Zacks earnings estimates at the moment, which falls below the Media Market’s 18.8X average and the S&P 500’s 16.6X. Furthermore, Comcast stock has traded as high as 20.3X over the last five years, with a five-year median of 16.9X. This means we can say with some certainty that Comcast presents solid value at the moment, even over a ten-year stretch.

 

 

Bottom Line

Comcast raised its dividend by 10% to $0.84 a share on an  annualized basis for 2019, for a quarterly payout of $0.21 per share. The first new dividend will be payable on April 24 to shareholders of record as of April 3. Shares of Comcast closed regular trading Wednesday down slightly to $38.61. This marked just a slight downturn from its recently-reached 52-week high of $39.66 a share.

Comcast is currently a Zacks Rank #2 (Buy) based, in part, on its recent earnings estimate revision trends. The company also sports “B” grades for both Value and Growth in our Style Scores system.

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