As Comcast (NASDAQ:CMCSA) releases its Q3 2012 earnings results on Oct 26, pay-TV subscriber losses, broadband gains and NBCUniversal’s performance will be in focus. The story of Comcast is likely to remain similar to what we have seen in the past few quarters, and thus, we can expect continued pay-TV subscriber losses and healthy growth in its broadband business. In addition to this, investors will be interested in NBCUniversal’s performance given that the company was able to grab broadcast rights for the Summer Olympics in the third quarter. NBCUniversal spent a mammoth amount of $1.2 billion just for the rights, and this could lead to reduced profits in Q3 for this segment.
Comcast lost 176,000 net pay-TV subscribers in Q2 2012, bringing the half year total to net loss of 213,000 subscribers.  As Q2 tends to be seasonally weak, higher losses were expected. The pay-TV subscriber loss figures are going to be better in Q3 not just because of the seasonality, but also because of the efforts that the company has been putting. By the end of Q2 2012, Comcast had more than 21 million digital TV subscribers implying that close to 95% of its pay-TV subscriber base was on digital platform. 
As digital penetration increases further, which is highly likely the case for Q3, we expect subscriber losses to reduce. Additionally, broadband growth will continue both due to ARPU (average revenue per subscriber) improvement and increase in number of subscribers. Business services (including TV, broadband and digital phone) will see substantial growth but their overall impact on the company will be small due to relatively small revenue base.
Furthermore, the broadcast of the Summer Olympics on NBC will put mild pressure on profits. Although NBCUniversal gained significant marketing, visibility and brand strengthening through this effort to pave way for several future sports broadcasting deals, the price was too steep. There is good chance that NBCUniversal would have lost money on its Olympics deal. Additionally, there may be a mild positive impact from NBC’s good start with the new season. NBCUniversal has been re-working its programming in order to revive its broadcasting business which contributes 20% to NBCUniversal’s profits. In turn, NBCUniversal contributes about 15% to Comcast’s value.
Finally, investors should watch out for Comcast’s margins which continue to face pressure due to rising programming costs.
Our price estimate for Comcast stands at $37, roughly in-line with the market price.Notes: