Comcast Earnings Preview: What We Are Watching

The biggest U.S cable operator Comcast (NASDAQ:CMCSA) will release its Q4 and full year 2011 results February 15.  The most recurring issue with the company has been the loss of video subscribers. Nevertheless, it has taken a few steps to address this issue with the acquisition of NBCUniversal and has further invested in its video-on-demand service. Will the effect be visible in Q4? Perhaps, but subscriber losses will still continue. Below we take a look at what to expect from the upcoming earning release. Comcast competes with other pay-TV and broadband providers such as Time Warner Cable (NYSE:TWC) and DirecTV (NASDAQ:DTV).

Our price estimate for Comcast stands at $26.60, implying a slight discount to the current market price.

See our complete analysis for Comcast

Video Losses to Continue But Expect Improvement & Compensation from Broadband

Last quarter Comcast performed better than its rival Time Warner Cable in terms of subscriber base losses.  Although Comcast had a loss of 165,000 video subscribers in Q3 2011 compared to Time Warner Cable’s loss of 126,000, Comcast fared well as its base is almost twice as large as Time Warner Cable’s.

In Q4 2011, Time Warner Cable’s losses continued as the company lost 129,000 video subscribers. Although this hints that Comcast’s video subscriber losses may increase from last quarter, we believe that they might in fact improve. Comcast has been continuously investing in its  Xfinity service and customer service to turn around its video subscriber losses. While that may take sometime, we will continue to see some positive impact each quarter.

To cite an instance of Comcast’s efforts, it recently entered into a 10-year agreement that will allow subscribers to stream live programming from Disney’s channels such as ABC and ESPN to a variety of devices including PCs, tablets and smartphones. This way Comcast will try to differentiate its service and hold on to its subscribers.

Additionally, we expect to see continued gains in broadband subscribers and overall revenue growth despite losses in its video subscriber base. This will also be aided by an improvement in average revenue per user (ARPU). Time Warner Cable has been especially successful at pushing its broadband offering.

NBC Broadcasting May Not Do Well, Watch For Cable Networks

Viacom’s (NASDAQ:VIA) earnings revealed that there was some softness in the advertisement market toward the end of Q4 2011. Last quarter, NBC Broadcasting revenues were flat while cable networks revenues grew. Given that NBC still lags behind other broadcasters, we do not expect any improvement. Nevertheless investors should keep a keen eye on how the cable networks division of NBCUniversal performs as almost 80% of profits come from this business. Comcast has already announced that it will re-launch its Versus Network as NBC Sports Network to tap more into the lucrative sports programming business, and this bodes well for its future.

Additionally, investors should also look for any announcement by Comcast concerning its previous spectrum deal with Verizon. It will help Comcast if it can make use of this opportunity to cross market its services with Verizon soon.

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