Comcast (Nasdaq: CMCSA), the biggest of the U.S. cable operators, continues to convince me that it will enjoy a bright future, despite the industry's slew of doomsayers.
Before we dig into the latest perceived threat, let's take a quick look at the results the company reported on Wednesday. Comcast's financial metrics included earnings of $1.02 billion, or $0.36 a share, versus $955 million, or $0.33 per share, in the year-ago quarter. The per-share number was $0.04 higher than the analysts' consensus forecast. Comcast booked $9.72 billion in revenue, up 7.2% from the year-ago quarter.
On the same day, Cablevision (NYSE: CVC) also reported earnings of $114 million, or $0.38 per share, up from $78 million, or $0.26 a share, in the last quarter of 2009. However, analysts had expected a per-share number closer to $0.42.
But the key to the quarter from the cable companies' perspective was what we can glean from their subscriber additions and subtractions. Focusing on Comcast, there's been a gnashing of teeth in some quarters regarding the steady departures of basic cable customers. Pessimists suspect that customers are "cutting the cord" -- dropping cable in favor of receiving their video online from the likes of Netflix (Nasdaq: NFLX).
The numbers simply don't support that contention. Sure, Comcast lost about 135,000 basic cable subscribers during the quarter. But its number of digital video customers -- who pay more for that service, with its higher number of features -- increased, as it has each quarter of late. Also, data and voice subscribers increased, helping the company add about 700,000 to its total of what the industry calls revenue generating units. As a result, its revenue per subscriber grew by nearly 11%.
At the same time, the telephone companies like Verizon (NYSE: VZ) and AT&T (NYSE: T), which also offer video, experienced customer gains for the quarter. And I'm willing to bet that the same will be true for satellite video providers DIRECTV (Nasdaq: DTV) and Dish Network (Nasdaq: DISH), which will report next Wednesday and Thursday, respectively. These expected net additions make it hard to buy the notion that the pay-TV model is wavering.
Indeed, as an erstwhile cable analyst, I believe that basic cable attrition is economic, rather than technical. Given our current economy, some folks simply have to trim spending, and cable is a logical place to start. On that basis, I'm still hawking Comcast, with its superb management team and the heightened array of content opportunities resulting from its new combination with NBCUniversal.
