What Are Comcast’s Key Revenue and EBITDA Drivers?

by Trefis Team
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Comcast (NASDAQ: CMCSA) has reported solid results so far this year, as its revenues and earnings per share came in ahead of market expectations. In the first nine months of fiscal 2018, the company’s consolidated revenues grew 6% year-over-year (y-o-y) to $66.7 billion and its adjusted EBITDA grew 4% y-o-y to $22 billion. The company benefited from continuing gains in broadband revenues, which offset declines in video revenues as residential subscribers continued cutting cords.

Comcast’s stock is slightly down year-to-date, due to weakness in its pay-TV business as a result of cord cutting. Our $42 price estimate for Comcast’s stock is almost 10% ahead of the current market price. We have created an interactive dashboard, which details our forecasts on the company’s revenue and EBIDTA estimates in fiscal 2018.  You can modify our assumptions to see the impact any changes would have on the company’s earnings and valuation. We expect Comcast to generate around $86 billion in revenues in 2018, and earnings of over $11 billion. Of the total expected revenues in 2018, we forecast $54 billion for the Cable Communication business and nearly $33 billion for NBCUniversal.

Comcast’s Cable TV business provides video, high-speed internet, voice, and security and automation services to residential customers under the Xfinity brand. The company’s video and voice subscribers have been declining modestly over the last two years due to stiff competition in live streaming media and telecom alternatives, respectively. We expect this trend to continue in the near term as well. While cord cutting is likely to weigh on its revenues, the popularity of Xfinity Double and Triple Play bundling should continue to largely offset these declines. Accordingly, we expect the subscriber losses to have a fairly limited impact on the company’s top line going forward. In addition, we expect Comcast’s high-speed internet customers to grow further, as the company could benefit from initiatives such as Xfinity Mobile, a wireless service through 16 million WiFi hot-spots. That said, Comcast is also aggressively pursuing over-the-top (OTT) streaming services, with the launch of Xfinity Stream and the recently rolled out Xfinity Instant TV across markets that the company already serves. Although the company currently does not provide the breakdown for its OTT service, we believe that the streaming service will be instrumental in retaining and attracting consumers for Comcast’s cable offerings. Overall, we forecast the company’s Cable Communication revenues to grow over 3% y-o-y in fiscal 2018 and reach $54.2 billion. In the past three years, the company’s revenues for Cable Communication business have increased from $46.9 billion in 2015 to $52.5 billion in 2017.

NBCUniversal saw strong results in television (broadcast and cable) amid higher distribution, advertising, and licensing revenues in the first nine months of fiscal 2018. Going forward, we expect the segment’s cable network revenues to likely improve further in 2018, as the increases in contractual rates could increase its revenues. We also expect Theme Parks to boost the company’s revenues in 2018, driven by the continued increase in guest spending and higher guest attendance in U.S. Comcast has been increasing its investments in this business, as it plans to open new attractions each year in the U.S. to boost its share in the growing market. NBC Universal’s revenues have increased at a faster rate from $28.4 billion in 2015 to $32.9 billion in 2017, and we expect it to slightly increase to $33.1 billion in 2018.

Comcast’s EBITDA has grown from $24.6 billion in 2015 to $28 billion in 2017, reflecting solid growth at Cable Communication and NBCUniversal. Going forward, we expect this value to increase and reach $31 billion in 2018.

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