Will Comcast Manage To Surprise Markets With An Earnings Beat For 2019?

by Trefis Team
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Comcast Corporation (NASDAQ: CMCSA) is slated to release its Q4 and full-year 2019 results on January 23, 2020. Trefis details expectations from the company in an interactive dashboard, parts of which are highlighted below. We believe that though Comcast’s earnings are expected to miss consensus marginally, revenue coming in slightly better than expectations could result in Comcast’s stock price rising post earnings release. We expect Comcast to report revenue of $108.8 billion (vs. consensus estimate of $108.7 billion), which would be 15.1% higher than 2018, primarily due to 2019 being the first full year post the acquisition of Sky in late 2018, and strong growth in Cable Communications. Earnings are expected to come in at $3.06 (vs. consensus estimate of $3.09), which would be 21% higher than $2.53 reported in 2018, due to healthy revenue growth and expenses increasing at a lower rate, thus pushing net income margin higher. We believe that marginally stronger-than-expected revenue for 2019 will likely result in Comcast’s stock price rising once earnings are announced. In fact, our forecast indicates that Comcast’s Valuation is $49 a share, which is roughly 6.5% above its current price of $46.

A] Revenue To Marginally Beat Consensus

  • Total revenues have increased at a CAGR of 8.2% over the previous two reported years, with the company adding about $13.8 billion to its revenue base between 2016 and 2018, primarily due to strong growth in Cable Communications and NBC Universal divisions, along with some benefit of Sky acquisition in late 2018.
  • Trefis estimates Comcast’s revenues to be $108.8 billion, marking a y-o-y growth of 15.1%.
  • Cable Communication revenue is expected to grow by 4.7% in 2019, driven by continued growth in the Residential Broadband space and a higher uptake for its Business services.
  • However, the primary factor behind a healthy revenue growth is the acquisition of Sky. With 2019 being the first full year post the consolidation, the segment is expected to add almost $14 billion to the company’s revenues.
  • NBC Universal is expected to be a drag on Comcast’s revenues, as the segment’s revenue is expected to decrease by 6.7% in 2019, due to lower broadcast revenue driven by decreases in advertising revenue resulting from broadcasts of the 2018 PyeongChang Olympics and the 2018 Super Bowl, which will be absent in 2019.

In a separate interactive dashboard – How Does Comcast Make Money? – we detail the trend in Comcast’s revenues and how each segment is performing, along with the outlook for 2019 and 2020.

B] EPS To Marginally Miss Consensus

  • Comcast’s 2019 earnings per share (EPS) is expected to be $3.06 per Trefis analysis, slightly behind the consensus estimate of $3.09 per share.
  • An increase in revenues as detailed above coupled with a steady share count will drive EPS growth on a y-o-y basis.
  • As we forecast Comcast’s Revenues to grow at a faster rate than Expenses in 2019 (15.1% vs. 14.4%), this will result in a slight increase in Comcast’s Net Income Margin figure from 12.4% in 2018 to 13.0% in 2019.
  • For 2020, we forecast a sharp reduction in revenue as well as expense growth rates, due to the high base effect. However, with revenue growth still expected to remain, the net income margin is likely to rise marginally to 13.3%.

C] Stock Price Estimate 6.7% Higher Than Market Price

  • A trailing P/E multiple of 16x looks appropriate for Comcast’s stock, as opposed to the current implied P/E multiple of 14.9x
  • Though Trefis’ forecast for Comcast’s 2019 earnings is marginally lower than consensus, its estimate for the P/E multiple is higher than market expectations, working out to a fair value of $49 for Comcast’s stock, as opposed to the current market price of around $46.

Additionally, you can input your estimates for Comcast’s key metrics in our interactive dashboard for Comcast’s pre-earnings, and see how that will affect the company’s stock price.


See all Trefis Price Estimates and Download Trefis Data here

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