Comcast Tops Profit Estimates After Cutting Its Video Losses

Comcast Corp. (CMCSA), the largest U.S. cable company, reported a better-than-estimated 32 percent increase in second-quarter profit after signing up more phone and broadband subscribers and losing fewer video customers.

Net income attributable to Comcast rose to $1.35 billion, or 50 cents a share, from $1.02 Billion, or 37 cents, a year earlier, the Philadelphia-based company said today in a statement. The average profit estimate of 26 analysts in a Bloomberg survey was 48 cents. Sales rose 6.1 percent to $15.2 billion, in line with estimates from 23 analysts.

Comcast improved its video guide, boosted Internet speeds and added phone features to fight competition from online video companies, satellite-television providers and Verizon Communications Inc. (VZ)’s FiOS and AT&T Inc. (T)’s U-verse. The company has curbed video losses for the seventh consecutive quarter on a year-over-year basis.

“Cable distribution is a cash machine, and Comcast used that cash to continue to buy back shares that we believe remain attractively valued,” Craig Moffett, an analyst at Sanford C. Bernstein & Co. in New York, wrote in a note to clients.

The company repurchased $750 million of its own shares and paid out $438 million in dividends in the quarter.

Comcast rose 3.1 percent to $33.55 at the close in New York, the company’s biggest one-day gain since Feb. 15. The shares have gained 42 percent this year.

Subscriber Data

Comcast lost 176,000 video subscribers, less than the 238,000 a year earlier and a smaller drop than the 184,000 average estimate of 14 analysts surveyed by Bloomberg. It added 156,000 broadband customers and 158,000 phone customers. Analysts had projected a gain of 153,000 Internet subscribers and 133,000 phone customers.

Seventy-five percent of customers bought at least two services from Comcast and about 40 percent purchased TV, Internet and voice, the so-called triple play package, the company said today on a conference call, after its report.

“We’re getting better products out there,” Neil Smit, president and chief executive officer of Comcast cable, said on the call. “We’re targeting our marketing better.”

Average total revenue per video customer rose 8 percent to $148.57. Time Warner Cable (TWC), the second-largest U.S. cable provider, reports earnings tomorrow.

Video Revenue

Revenue at NBC Universal, a unit of Comcast, fell 0.8 percent to $5.5 billion as “Battleship” flopped at the box office, leading to an $83 million operating cash-flow loss in filmed entertainment. NBC Universal’s operating cash flow declined 15 percent to $982 million from a year earlier as sports and original programming costs increased. A content licensing deal with Netflix Inc. (NFLX) that added to Comcast’s sales in the second quarter last year also led to the decline.

Broadcast television revenue fell 9.1 percent to $1.54 billion as the network struggled to gain share against CBS Corp.’s CBS and News Corp.’s Fox, which lead NBC in prime-time ratings. Broadcast advertising sales fell 0.2 percent to $1.11 billion, while and cable network advertising revenue rose 4.1 percent to $924 million.

“Investors are focused on the magnitude of investments in NBC content, in particular relative to corporate capital allocation policies,” Jason Armstrong, an analyst at Goldman Sachs & Co. in New York, said in an interview. “The cable business can be on fire, but NBC’s results aren’t as strong, and the question is how much dilution will come from NBC.”

Olympics Ratings

NBC’s Olympics ratings “are way up versus forecast,” NBC Universal CEO Steve Burke said on the conference call. NBC now expects to be “right around” the break-even point to make money on the London Games, which Burke said had been projected to lose as much as $200 million.

The ratings for the Games are up 9 percent so far from the Olympics in Beijing. NBC had projected ratings to be down 20 percent, Burke said.

NBC has been tape-delaying marquee events and airing them on the broadcast network during prime-time hours to generate higher advertising revenue. The decision has drawn broad criticism that’s been aired on Twitter for not catering to audiences that want to watch events live. Cable subscribers can get access to live events online through NBC’s website.

“For the first time we have a strategy that embraces broadcast, cable and digital,” Burke said. “So we have a lot of exposure all leading up to these great numbers in prime time.”

To contact the reporter on this story: Alex Sherman in New York at asherman6@bloomberg.net

To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net

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