Comcast Looks for an Olympic Boost at NBCUniversal

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Comcast Looks for an Olympic Boost at NBCUniversal

By: Chad Fraser

Comcast (NasdaqGS: CMCSA), owner of a 51% share in NBCUniversal, released some promising news in the run-up to its second quarter earnings release on August 1: Olympic advertising had surpassed the $1-billion mark. That’s up sharply from the $850 million of ads that NBC sold for the Beijing Games.

“It’s an important and a symbolic number for us,” Seth Winter, executive vice-president for sales at NBC Sports Group, told the New York Times on July 25. “It’s unprecedented for any event to hit that kind of number.”

Part of that growth came from strong sales of online ads, which have tripled from 2008, to $60 million from $20 million, because NBC is streaming all events online for the first time. Television ratings are up, too, so far topping the Beijing Games by 9%.

Still, when you factor in the massive cost of televising the event, Comcast only expects to break even. But the fact that Comcast isn’t losing money on the Games—combined with the ratings increase—essentially gives it a valuable platform to promote and increase viewership of NBC’s other programs, essentially for free.

Second Quarter Brought More Good News for Comcast

The Olympics started after the second quarter ended on June 30, so they didn’t play a role in the latest quarterly results from Comcast. That gave the cable operations a chance to steal the show.

Overall, revenue rose 6.1% at Comcast in the quarter, to $15.2 billion from $14.3 billion a year ago. Earnings per share jumped 35.1%, to $0.50 from $0.37. However, if you exclude a non-recurring income tax charge in the year-ago quarter, earnings per share rose 19.0%, to $0.50 from $0.42. That beat the consensus forecast of $0.47 a share in profits. Revenue matched the Street’s expectations.

The cable division, which accounts for nearly two-thirds of overall revenue at Comcast, saw its revenue rise 6.0% on strong demand for business services and high-speed Internet. The division lost 176,000 video customers in the quarter. That’s part of a longer-term trend as clients switch to TV services offered by satellite and phone companies. Still, the Comcast cable division as a whole added 138,000 new subscribers, up 40.1% from the 99,000 it signed up a year ago.

“The ‘story’ this quarter for Comcast again is better video and high-speed data results than we expected,” wrote ISI analyst Vijay Jayant.

NBCUniversal revenue slipped 0.8% as gains at the theme park and cable network segments weren’t enough to offset declines at the broadcast television and filmed entertainment businesses, the latter of which was hurt by the disappointing performance of the Battleship film.

Record Election Ad Spending Is Another Plus for Comcast

“They were in line with our expectations of strength at cable, but weak trends at NBCU,” Todd Mitchell, an analyst at Brean, Murray, Carret & Co., told Reuters.

Comcast has continued to work on improving NBCUniversal’s performance since it closed its purchase of the broadcaster in January 2011. In the first quarter, it rode the Super Bowl to strong revenue gains, and it’s obviously looking to build on that with the Olympics. That will put its third quarter results, which include the Games, squarely in the spotlight.

The company is also well-positioned to benefit from a sharp rise in political ad spending in the run-up to the November presidential election. In 2008, both Democrats and Republicans spent a combined $515 million on campaign advertising, and a far higher total is expected this time around. Here, too, the Olympics are helping the company. Last week, Adweek reported that the Obama campaign had spent $6 million to buy advertising on NBC during the event.

Buybacks and Dividend Add to Comcast’s Appeal

The company is also a frequent buyer of its own stock. In the second quarter, it bought back 25.8 million of its common shares for $750 million. So far this year, it has repurchased 51.7 million common shares for $1.5 billion. It has $5.0 billion remaining on its current authorization.

The company also spent $438 million on dividends in the quarter. Its annual rate of $0.65 a share yields 1.94%.