The fresh financial results out of Comcast (CMCSA 1.85%) on Thursday morning weren't particularly newsworthy on the surface. Revenue for the third quarter rose less than 1%, as gains for its broadband and wireless connectivity were enough to offset the continuing slide in the cable TV and advertising businesses. Free cash flow and adjusted net income had stronger increases, but the market wasn't impressed. The stock was trading 7% lower minutes into the new trading day.
However, a small part of Comcast's business keeps thriving. Comcast's theme parks segment was a bright spot in Thursday's report, and that's welcome news for Walt Disney (DIS -0.04%) and SeaWorld Entertainment (SEAS -0.67%) shareholders as they gear up for their quarterly updates in early November.
As the turnstiles turn
Comcast owns and operates the Universal theme parks, and the seasonally potent summertime quarter lived up to its potential. The gated attractions generated $2.4 billion in revenue, a 17% year-over-year improvement for Comcast. The news is even better on the bottom line. Despite the challenge of rising costs, adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) rose 20% to $983 million, a new record for the segment.
Theme parks represent just 8% of the total revenue mix for Comcast given its more substantial business getting folks online and on its cable TV platform. Theme parks make up roughly a third of Disney's revenue. SeaWorld's entire business relies on how it's faring at the turnstiles of its attractions.
Seeing Comcast theme parks deliver another quarter of double-digit revenue growth with improving margins is encouraging. There was plenty of anecdotal evidence suggesting that guest traffic at the country's national theme parks and regional amusement parks had a sluggish end to the peak summertime travel period. A brutally hot summer was reportedly keeping people indoors, but other macro factors including economic concerns and gas prices inching higher could've been headwinds for the attractions operators.
Higher prices for admissions and in-park offerings could have also kept patrons away, but this apparently wasn't a problem for Comcast. Its customers were willing to pay up for the experience, and we'll find out soon if that success trickled over to its peers. SeaWorld and Disney will report their latest quarterly results on Wednesday, Nov. 8. SeaWorld will report in the morning. Disney follows shortly after the market close.
All three companies have competing attractions in Central Florida and Southern California that dominate their financials. One might think that the success for one operator can come at the expense of the others, but history shows that if one is doing well there's a good chance that the same forces drawing tourists and locals to its gates are also driving traffic to its rivals. If one player is flexing its pricing muscle by raising prices -- and it proves successful -- it only incentivizes the others to follow suit.
A big wrinkle in the report is that Comcast did see a year-over-year decline in revenue for its Orlando resort. This is a big deal since Disney World is Disney's largest resort and there are five Sea World attractions in Central Florida. Comcast parks had big gains outside of Florida, but partly because it teamed up with Nintendo to open Super Nintendo World at Universal Studios Hollywood earlier this year. Disneyland and the original SeaWorld San Diego park likely didn't have the same kind of windfall. Comcast also saw its international parks improve their guest counts compared to pandemic-related restrictions a year earlier, something that should also apply to Disney's overseas attractions.
The silver lining here for these travel and tourism stocks is that expectations are already low. Analysts see SeaWorld posting an 8% decline in revenue for the quarter. Disney and SeaWorld may not keep up the big year-over-year gains at its rival this earnings season, but the industry itself is possibly in better shape than what worrywarts are expecting.
