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Comcast Is Building a Formidable Media and Entertainment Empire

By Nicholas Rossolillo - May 2, 2019 at 12:23PM

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Customer relationships and international results edged higher during the quarter, too.

Comcast's (CMCSA 0.07%) first-quarter 2019 results were nearly everything investors could have hoped for. Revenues and earnings per share were 17.9% and 16.7% higher, respectively, thanks in large part to last year's takeover of the British broadcasting company Sky. Though the entertainment world is in flux, Comcast is doing just fine. There are still plenty of reasons to like the stock, aside from the fact that it's already up 28% so far this year.

More customer connections and solid broadcasting

Comcast's cable business continued to chug higher, which led to a double-digit increase in the bottom line for the company's largest segment. Net customer additions were 300,000 (3.6% year-over-year growth) with high-speed internet leading the way with a 375,000 increase in customers. Voice connections fell once again, but the higher-profit-margin internet portion of the business (and lower capital expenditures) was responsible for the overall gain in profits.

Metric

Q1 2019

Q1 2018

Change (YOY)

Cable Communications

Revenue

$14.28 billion

$13.70 billion

4%

Adjusted EBITDA

$5.73 billion

$5.22 billion

10%

NBCUniversal

Revenue

$8.31 billion

$9.50 billion

(13%)

Adjusted EBITDA

$2.34 billion

$2.27 billion

3%

Data source: Comcast. YOY = year over year. EBITDA = earnings before interest, taxes, depreciation, and amortization.

Cable and broadcast television didn't fare so well, which caused the NBCUniversal segment's revenues to fall. Cable network and distribution revenues were down 9.2% due to the PyeongChang Winter Olympics that took place in the year-ago quarter. Broadcast television was even worse, posting a 29.4% drop -- again because of the PyeongChang Olympics, but additionally because of NFL Super Bowl LII last year (the Super Bowl in 2019 aired on competitor channel CBS (PARA 4.66%)). The good news is that, excluding those two one-time events, revenues would have increased by mid-single digits.

Elsewhere at NBCUniversal, filmed entertainment grew 7.4% and theme parks were flat. Adjusted EBITDA was up a whopping 78.7%, though, due to the success of the third installment in the How to Train Your Dragon trilogy and the horror flick Us. Thus the overall NBCUniversal segment still turned in a profitable quarter even though sales took a tumble.

A TV in the background displaying a sporting event. A hand holding a remote control is displayed in the foreground.

Image source: Getty Images.

The dollar beats back Sky

Comcast is in the beginning stages of putting its new international TV arm to work. The company is exploring combining various Sky operations with NBCUniversal to reduce costs and explore new areas of growth. In the meantime, the first-quarter numbers weren't the best. 

Metric

Q1 2019

Q1 2018

Change (YOY)

Revenue

$4.80 billion

$5.05 billion

(5%)

Adjusted EBITDA

$663 billion

$799 billion

(17%)

Data source: Comcast. YOY = year over year. EBITDA = earnings before interest, taxes, depreciation, and amortization. 

Results were underwhelming, but it isn't the whole story. A strong U.S. dollar during the first quarter reduced revenue and profits when Comcast exchanged the British TV segments sales back into Benjamins. When excluding currency conversion, revenue would have been up 1.9% and adjusted EBITDA would have decreased 11.3%. Another positive note: Sky's customer relationships grew 112,000 to 23.7 million during the quarter. That should equate to a rebound later on in the year if Sky can keep up that pace of new customer additions. 

In short, it was a solid start to the new year for Comcast. The media conglomerate is continuing its solid results from 2018, and has plenty of irons in the fire to keep the trend rolling. Trading at just 13.4 times price to free cash flow and paying a 2.1% annual dividend, this stock is worth a look.

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