Comcast's Doing Just Fine, Thank You

Say what you want about Comcast (CMCSA 1.71%), but the overall business is going swimmingly. Still fresh off its takeover of British cable company Sky, deal with Disney (DIS 0.32%) to divest itself of Hulu, and continued calls for disruption of the cable TV and phone market, Comcast reported solid second-quarter 2019 results that should further lay to rest any arguments that there are flaws with the entertainment and cable conglomerate. With shares up 33% in the last 12 months, there's reason to believe the good times for shareholders will keep rolling.

First, the 2019 halftime report

Comcast's revenues were up 24% year-over-year to $26.9 billion during the second quarter, and adjusted earnings per share grew 13%. Granted, those numbers include results from the addition of Sky, but even excluding the European cable and entertainment business yields some pretty solid returns for Comcast investors through the first half of the year.

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

Within cable communications, total net new relationships grew by 152,000 due to high-speed internet, security solutions, and wireless phone subscriptions. Loss of landline phone and cable TV packages has been a drag for years -- and likely will continue to be for some time -- but Comcast is more than offsetting those losses with more modern offerings. Thus, though Netflix (NFLX 1.44%) and the cord-cutting revolution have been disruptive, they haven't been an insurmountable challenge. Besides, Comcast's Xfinity has had answers, including an OTT streaming device similar to Roku (ROKU 0.34%). More on that and Comcast's other streaming ambitions in a minute.

Moving on to the NBC Universal segment, total revenues are down slightly due to the lack of Winter Olympic Games and the National Football League's Super Bowl broadcasting from 2018. Still, the bottom line is up due to successful box office showings for Us, How to Train Your Dragon: The Hidden World, and The Secret Life of Pets 2. There has also been worry over reported sluggish turnout at theme parks this summer, but Universal Studios parks did OK in the spring quarter with a 7.5% and 3.8% increase in revenue and adjusted EBITDA, respectively. There's no need to worry about the family vacation-oriented side of the business -- at least not yet.

And then there's Sky, which yielded 304,000 net new relationships for a total of 24 million cable subscribers on the European continent at quarter end. A strong U.S. dollar has hit revenues when Comcast exchanges foreign currency into greenbacks, but strong performance in the cable and entertainment segment has nonetheless been helping Comcast turn its newest acquisition into a cash machine. Adjusted EBITDA during Q2 was up 13%, or 20% excluding the effects of currency exchange rates.  

Image source: Getty Images.

Not exactly a trendsetter, but slow and steady is A-OK

On the business-trendy side, Comcast did finally reveal when NBCUniveral would debut its own streaming service to rival Netflix, Hulu, and Disney's hotly anticipated Disney+ (launching autumn 2019), among others. According to NBCUniversal head Stephen Burke, April 2020 is when consumers can expect to see the yet-to-be-named next-gen TV offering.

Comcast's entertainment division isn't exactly setting the world on fire with this announcement; there are, after all, plenty of options out there already with plenty more on the way. And Comcast already inked a long-term deal with Disney to get itself out of Hulu, cash proceeds from which it will use to pay down debt and create content for NBCUniversal streaming. Universal outbid Netflix for streaming rights to The Office -- its old hit comedy series that will continue on Netflix through 2020 and is still the TV streaming leader's most-watched show.

If polls and surveys from Nielsen are correct, though, this matters. New shows and movies are undoubtedly important to entertainment companies for attracting viewers, but it's familiarity with old content that still ranks as the highest in importance for consumers when choosing what to watch and what to subscribe to. Old habits die hard, and change is difficult to accept -- unless the change means a favorite show is moving to a new home. Comcast is thus, in its own small way, setting itself up to disrupt the disruptor.

This buzz-worthy piece of news is in no way a reason by itself to invest in Comcast. With tens of millions of customer relationships already across internet services, mobile, and broadcast television -- not to mention its film and theme park assets -- what's a potential extra few million subscribers a year to an upstart streaming service? The answer is not much.

But it's another iron in the fire for this massive media empire, and slow and steady is the name of the race here. With shares trading at a reasonable 14.5 times trailing 12-month free cash flow and a dividend yielding 1.9% a year, there's a lot for investors to like about Comcast stock.