Suffice it to say 2020 wasn't great for media companies -- Comcast (CMCSA 0.16%) included -- and the media and communications giant still isn't out of the woods. Nevertheless, the company ended the year on a high note by rewarding shareholders with a 9% dividend hike. It may be far from perfect, but this is a well-managed business with a long track record of making investors money.
How Comcast was so resilient in 2020
On a consolidated basis, Comcast's revenue and adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) fell 2.4% and 14.8%, respectively, during the fourth quarter of 2020. The culprit was primarily weakness at NBC Universal, as has been the case throughout the pandemic, as Universal Studios theme parks remain closed or restricted and theatrical movie releases are on standby.
Image source: Getty Images.
However, the "cable communications" segment performed admirably again. Though cable TV customers dropped to 19.8 million (compared to 21.3 million a year ago), high-speed internet subscriptions soared higher to 30.6 million (28.6 million last year). CEO Brian Roberts explained:
Outstanding performance at Cable drove very strong fourth quarter results for our company. We added 538,000 net new broadband customers and delivered adjusted EBITDA growth of over 12%. Our theme parks in Orlando and Osaka reached breakeven; and encouragingly, Sky [European cable and media subsidiary] returned to customer growth in all three of its markets, bringing our total customer relationships and overall revenue in Europe essentially back to 2019 levels. With the vaccines rolling out throughout the world, we are optimistic that the parts of our business that had been most impacted will soon be back on a path toward growth.
In spite of a most challenging year, Comcast's full-year 2020 results certainly could have been much worse.
|
Metric |
Full-Year 2020 |
Full-Year 2019 |
Change |
|---|---|---|---|
|
Cable Communications | |||
|
Revenue |
$60.1 billion |
$58.1 billion |
3.4% |
|
Adjusted EBITDA |
$25.3 billion |
$23.3 billion |
8.6% |
|
NBCUniversal | |||
|
Revenue |
$28.1 billion |
$34.0 billion |
(17.3%) |
|
Adjusted EBITDA |
$6.3 billion |
$8.8 billion |
(28.5%) |
|
Sky | |||
|
Revenue |
$18.6 billion |
$19.2 billion |
(3.3%) |
|
Adjusted EBITDA |
$2.0 billion |
$3.1 billion |
(36.9%) |
EBITDA = earnings before interest, tax, depreciation, and amortization. Data source: Comcast.
A coming rally in travel and entertainment, and the streaming TV frenzy
In other highlights, Comcast said its Peacock streaming service hit 33 million subscribers during the final quarter of the year, no doubt helped by its inclusion on Roku's streaming TV platform. Of note, this milestone was achieved before The Office migrated over to Peacock from its previous home on Netflix, where it was a top-viewed series for years. In addition, Xfinity (the U.S. cable subsidiary) is still adding subscribers to its X1 entertainment platform that combines TV, music streaming, and other apps in one convenient location. While cable TV is slowly going the way of the buffalo, those 19.8 million subscribers aren't going to simply disappear overnight.
Peacock should continue to benefit from inking a deal with Roku, and investors shouldn't underestimate the kind of boost The Office can provide after it landed at Peacock on Jan. 1. But Comcast isn't resting on its early progress in its next-gen TV entertainment segments. It's reportedly in talks with Walmart to distribute a smart TV platform like Roku. Eventually, Peacock and Comcast's other next-gen TV aspirations will start to offset weakness in the legacy cable TV realm.
But for the year ahead, the gradual easing of the effects of the pandemic bode well for Comcast's beleaguered NBCU segment, and there's an incredibly good chance that revenue and profits return to growth as theme park and box office numbers lap the worst of the economic lockdown last spring. And trading at just eight times 2020 adjusted EBITDA (or 18 times 2020 free cash flow), shares look like a real value to me.
Plus, there's that dividend, now good for an annual yield of 2% after the payout increase. The pay raise came because management feels confident business will recover in the year ahead. And though profitability was down in 2020, dividend payments only used up less than one-third of free cash flow.
Long story short, Comcast shares are a reasonable value, business is in line for a rally in 2021, and the dividend is handily covered by the company's cash generation. If you're an investor looking for a balance of growth and investment income, this stock should rank high on your list.
