Comcast Earnings Preview: Growth In Revenues Across Verticals To Continue

Comcast (NASDAQ:CMCSA) is set to report its Q1 earnings on Thursday, April 27. ^[1] In 2016, the company reported 7.9% growth in revenues as the company benefited from ad revenues for the Olympics and the U.S. presidential election. While there was a relative lack of TV programming in the first quarter of 2017, minor events such as the Presidential Inauguration were aired across the television networks and helped broadcast companies to improve their revenues. As a result, we expect that the revenues from Comcast’s cable network and broadcast TV vertical will report modest growth. Additionally, the Cable TV Communication and Broadband Internet segments should see strong growth in Q1.

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NBC Universal, Content Business To Report Mid-Single Digit Growth

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

During 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 11%.

The Cable Networks vertical reported growth of close to 9% during 2016 as distribution revenue from the broadcast of the 2016 Rio Olympics in August 2016 boosted the top line. Furthermore, increases in the contractual rates charged under distribution agreements and contract renewals boosted revenues. We believe that the increases in contractual rates will continue to buoy revenues in Q1. Furthermore, telecast of minor events such as the US Presidential Inauguration Ceremony will boost Q1 revenues.

Cable TV Vertical Grows

The Cable TV business accounts for close to 28% of our price estimate for Comcast’s stock. For 2016, the company’s cable TV revenue grew by 3.9% to $22.35 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 its churn rate was less than expected, as a result of its continued deployment of the digital X1 platform. The company reported a net addition of 161,000 new video cable users for its services. We believe that the churn rate (the annual percentage rate at which customers stop subscribing to cable TV service) for Q1 was likely low as the company continued the deployment of its digital X1 platform. Furthermore, cross sales of double and triple bundle packages helped the company to offset the decline in subscribers.

Broadband Internet Grows As Adoption Improves

Broadband Internet is the third largest division and contributes nearly 20% of Comcast’s value, according to our estimates. During 2016, Broadband Internet revenue grew by 8.5% to $13.53 billion. Additionally, the company added 1.37 million net new users for its internet services. We expect this to continue in Q1, which should in turn boost revenues for the quarter.

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