Cable internet giant Comcast (CMCSA +0.00%) stock slipped 6% through 11:11 a.m. ET Thursday despite the company reporting better than expected sales and earnings for the first quarter of 2024.
Analysts had forecast the communications company would earn only $0.99 per share (non-GAAP, or adjusted) on sales of $29.8 billion in Q1, but Comcast surprised to the upside with $1.04 per share in earnings and sales of $30.1 billion. Yet its stock fell. Why?
NASDAQ: CMCSA
Key Data Points
Comcast's Q1 earnings report
Comcast's news wasn't all good. While the company beat expectations on both the top and bottom lines, revenue still only grew about 1% year over year, and net income rose less than 1%.
Still, by buying back shares (so that what net income there was, was divvied up among fewer shares), Comcast managed to grow its earnings per share 6.5%, to $0.97 according to generally accepted accounting principles (GAAP). What's more, Comcast's free cash flow for the quarter surged nearly 20%, to $4.5 billion, which was better than reported net income.
Also of interest: Comcast grew its broadband internet revenue 4% -- 4 times faster than total revenue growth. And the company increased its wireless customer subscriber count by 21%, to 6.9 million subscribers.
Is Comcast stock a buy?
Still, the number that interests me most is Comcast's free cash flow, which grew tremendously. At $16.8 billion, FCF now outstrips trailing net income by about 9%. And valued on these cash profits, Comcast stock costs less than 9x FCF. Considering that Comcast pays its shareholders a respectable 3.1% dividend yield, it shouldn't take more than about 6% annual growth to make this stock look like a bargain.
Thanks to stock buybacks, Comcast actually just grew EPS by 6.5% (and FCF nearly 20%). Were it not for the fact that Comcast carries $90 billion more debt than cash on its balance sheet, I'd probably be calling this stock a buy right now. With the debt, I'm less sure -- but right now, and despite today's sell-off, I'm still leaning toward the buy camp on Comcast stock.
