Reviewing Comcast’s Performance In 2016.

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Comcast  Corporation’s (NASDAQ:CMCSA) stock has underperformed the NASDAQ composite index by 17 basis points (0.17%) over the past year. While the NASDAQ composite index rose by 2.75% in 2016, Comcast’s stock price rose by 2.58% during the time frame. During the year, the company’s NBC Universal businesses have witnessed double-digit growth on the back of the live telecast of 2016 Rio Olympics. The cash cow of the company, the Cable video business that maps onto Trefis’s Cable TV division, also reported growth on the back of new residential customer acquisition. In this note, we will review Comcast’s business performance in 2016 for three of its major divisions.

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NBC Universal & Comcast Content Business Expected To Report Mid-Single Digit Growth For 2016

Comcast’s content business includes its regional sports and news networks, some Comcast interactive media businesses (digital media properties like XfinityTV.com, Xfinity TV app, and Comcast.net) and channels like E!, the Golf Channel, etc. NBC contributes its own cable networks, broadcasting, filmed entertainment, and theme parks.

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During the first nine months of the fiscal year 2016, the company reported that its revenues for NBC universal and Comcast content (reported under cable network, broadcasting television, theme park and filmed entertainment) grew by 5.8%.

The Cable networks vertical reported a growth of over 10.3% during the first nine months. The primary reason for growth was the increase in distribution revenue from the broadcast of the 2016 Rio Olympics in August 2016, as well as increases in the contractual rates charged under distribution agreements and contract renewals. The growth was offset by declines in the number of subscribers at its cable networks. Additionally, advertising revenue grew due to Olympics 2016.  For 2016, we expect the company to exit with over $10.5 billion in revenues, a growth of over 9%.

The broadcasting TV division reported 21% growth in revenues due to increases in advertising revenue, distribution and other revenue, and content licensing revenue. Additionally, the increases in advertising revenue were primarily due to the broadcast of the 2016 Rio Olympics. Advertising revenue also increased due to higher prices for advertising units sold, which was partially offset by declines in audience ratings.

The film entertainment division reported a 20% decline in revenues to $4.5 billion. The primary reason for the decline in revenue was the lack of any notable movie releases, for both theatrical and home entertainment, during the first nine months of the fiscal year. However, on August 22, 2016, Comcast acquired all of the outstanding stock of DreamWorks Animation SKG, Inc. (“DreamWorks”) for $3.8 billion. Going forward, we expect this acquisition to bolster revenues for the division. Despite the acquisition, the slate of movies in the last quarter of 2016 looked bleak. Therefore, Trefis expects that revenue for this division will lackluster for FY2016.

Theme park segment reported a 12.5% growth in revenues to $3.6 billion for the first nine months of the year, primarily due to increases in guest spending and higher guest attendance driven by the successful opening of The Wizarding World of Harry Potter™ attraction in Hollywood in April 2016, as well as the positive impact of foreign currency translation due to the strengthening of the Japanese yen. The strengthening of the Japanese yen accounted for approximately one-third of the increases in revenues, from Universal Japan theme park, for the nine months ended September 30, 2016. Trefis expects this trend to continue in the last quarter of 2016 and the company to exit with revenues of over to $4.7 billion.

Cable TV Vertical Grows

Comcast offers a pay-TV service via its cable infrastructure for regular programming packages, HD/DVR services, video-on-demand services, and Xfinity Streampix. Comcast has successfully migrated its subscribers on a digital platform from the analog platform. This division makes up over 27.3% of Comcast’s estimated stock value.

For the first nine months of the fiscal year 2016, the company reported that its cable TV revenue grew by 3.7% to $16.7 billion, primarily due to rate adjustments and, to a lesser extent, increases in the number of residential customers subscribing to additional services such as premium channels and advanced services. Additionally, the company reported that the churn rate, the annual percentage rate at which customers stop subscribing to cable TV service, was less than expected as a result of its continued deployment of digital X1 platform. The company reported a net addition of 81,000 new video cable users for its services. Trefis expects that this trend continued in Q4 2016 and the company to add users in 2017.

Broadband Internet Grows As Adoption Improves

Comcast offers high-speed internet (Broadband) services to residential customers under the XFINITY brand. Broadband internet is the third largest division and contributes over 23% to its stock value. During the first nine months, broadband internet revenue grew by 8.4% to $10.0 billion. Additionally, the company added 988,000 net new users for its internet services. Increases in the number of residential customers receiving the high-speed Internet service accounted for increases in revenue of 6.0% for the nine months ended September 30th. On an average, the company is adding 330,000 net new subscribers. Trefis estimates that this trend resulted in a subscriber base of 24.65 million in 2016. With the increasing use of Internet for content consumption, broadband internet is expected to increase in the coming years.

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