Comcast Earnings: High-Speed Internet Growth Overwhelms Cord-Cutting

In today's digital world, high-speed internet is a staple -- one that is necessary for work and for play, for the acquisition of basic needs, and for discretionary spending. And in this area, media conglomerate Comcast (CMCSA -0.33%) shines. The company isn't likely to win any awards for most-loved brand in America anytime soon, but its stable of internet, communications, and entertainment services makes this a value stock worth owning in good economic times and bad.

If you could only focus on one thing...

Comcast breaks its earnings results, which were released Thursday, into three basic segments: cable communications, NBCUniversal, and Sky (the British and European broadcaster it purchased in 2018). Of the three, cable communications -- which includes Xfinity and the high-speed internet operation -- contributes half of the revenue and the lion's share of profits.

Image source: Getty Images.

Though Sky's profits rebounded in a big way in Q3 (adjusted EBITDA was up 38% compared to a year ago, see below) and NBCUniversal is still down on the top line (no Olympic Games or Super Bowl broadcasting this year), it's the consistent returns on internet service that's the real story here. Total customer relationships increased by 3.4% to 31.2 million, with net customer additions of 309,000 setting a new quarterly record. While cable TV and landline phone cutting remain a headwind, residential high-speed internet and business services revenue both increased 9.3% year-over-year. Wireless phone connections -- which Xfinity provides via Verizon's network -- were also at 1.79 million compared with just 1.01 million a year ago. 

Paired with results from the first half of 2019, Comcast is piecing together a solid year of results.

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

Enhancing its digital strategy

Much like Disney, Comcast has power in its vertically integrated operations. It can connect with the consumer on multiple levels, although maybe not with the same brand depth as its peer does on the entertainment content side. Perhaps that will change over time. Details are slim at this point, but a fourth theme park will open in Orlando in 2023 to enhance that solidly performing part of NBCUniversal. What Comcast lacks in sparkle, though (compared with Disney and its Marvel, Star Wars, and Pixar franchises), it makes up in solid slow-and-steady expansion elsewhere.

Cable TV subscribers (residential) in the U.S. fell by a net 222,000 in Q3, reducing Comcast's count to 20.4 million. A solution to the drain on the largest segment is coming, though: Peacock, NBCUniversal's answer to Netflix and other streaming peers which will debut in April 2020. That could help further boost the cable segment and deepen consumer internet relationships. Direct-to-consumer services are also paying off in Europe. Sky has added 482,000 customer relationships over the last 12-month stretch, and sales and EBITDA have grown 2% and 46%, respectively, year-to-date when excluding negative currency exchange rates because of a strong U.S. dollar and weak British pound.  

All told, free cash flow (profits after all operating and capital expenditures are paid) is $10.9 billion through the first nine months of 2019, valuing the stock at just 14.7 times its 12-month trailing cash generation and 13.2 times one-year forward earnings expectations. Paired with a 1.8% dividend yield, this stock is still worth some attention -- especially for investors looking for stability if the economy enters a rough patch.