Comcast's Capex Conundrum

Sometimes the market can be so perverse. Such was Comcast's (Nasdaq: CMCSA  ) sorry lot on Thursday -- its quarterly profit tripled, but the stock sank about 3.2% on the day.

By most analysts' reckoning, the decline was largely due to management ratcheting up its estimate for 2007 capital spending. At approximately $5.7 billion, that would be nearly 20% higher than the $4.8 billion Wall Street had anticipated.

According to CEO Brian Roberts, most of the added amount is earmarked for an accelerated introduction of new products -- including high-definition video -- and as part of the program to target small- and medium-sized business as potential subscribers for some or all of its "triple play" offerings, particularly telephony. However, had Roberts forecast a lower capital spending total, there likely would have been a hue and cry over a perceived lack of effort to ward off threats to cable from newly video-wielding telephone companies Verizon (NYSE: VZ  ) and AT&T (NYSE: T  ) .

Among Comcast's more meaningful metrics for the quarter was an increase of 14% in cable revenues and a 17% growth in cable operating cash flow. During the quarter, the company added 613,000 digital video subscribers, along with a net of 508,000 digital telephone customers and 488,000 subscribers to its high-speed data product. These figures helped the company increase its quarterly revenues by 30% year over year to $7 billion, and to increase diluted per-share earnings to $0.18, from the $0.06 recorded in the same quarter of 2005.

Comcast also announced that it had repurchased $2.3 billion worth, or 75.4 million, of its Class A Special Common (CMCSK) shares during the year, with $447 million of those purchases occurring in the fourth quarter. Also announced: a three-for-two stock split in the form of a 50% stock dividend, payable on Feb. 21 to shareholders of record on Feb. 14.

Now, with 2006 effectively wrapped up, I believe that there are two primary questions Fools should ask, especially following yesterday's numbers and the approximately 65% share-price increase Comcast has enjoyed since the beginning of last year:

  • Is it still logical to contend that the Brian Roberts-led team at Comcast is one of the best management groups around, regardless of industry?
  • Can cable fend of the progressively more noticeable incursions from the telephone companies?

For question one, I see no reason to alter my earlier comment: The Roberts team is the most capable group I've yet encountered.

As for question two, I see increasing evidence that Comcast, Time Warner (NYSE: TWX  ) , Cablevision (NYSE: CVC  ) , et al., will ultimately be forced to battle the telecom companies tooth and nail for subscribers. But the Comcast crew is, I believe, up to the task. And they currently have a video-on-demand content lead that will stand them in very good stead, probably for several years to come.

For related Foolishness:

Time Warner is a Motley Fool Stock Advisor selection. Discover more of Tom and David Gardner's superior stock selections with a free 30-day trial subscription.

Fool contributor David Lee Smith does not own shares in any of the companies mentioned. He welcomes your questions or comments.

Read/Post Comments (0) | Recommend This Article (15)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 521157, ~/Articles/ArticleHandler.aspx, 10/22/2016 11:20:20 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 1 day ago Sponsored by:
DOW 18,145.71 -16.64 -0.09%
S&P 500 2,141.16 -0.18 -0.01%
NASD 5,257.40 15.57 0.30%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/21/2016 4:00 PM
CMCSA $64.06 Down -0.29 -0.45%
Comcast CAPS Rating: ***
CVC.DL $0.00 Down +0.00 +0.00%
Cablevision System… CAPS Rating: *
T $37.49 Down -1.16 -3.00%
AT and T CAPS Rating: ****
TWX $89.48 Up +6.49 +7.82%
Time Warner CAPS Rating: ***
VZ $48.20 Down -0.94 -1.91%
Verizon Communicat… CAPS Rating: ****