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Comcast Tops Earnings Estimates, Boosts Dividend

Comcast Tops Estimates, Boosts Dividend, Stock Buyback Plan
A Comcast Corp. field service technician arrives to install cable service at a residence in Reading, Pennsylvania. Photographer: Bradley C. Bower/Bloomberg

Comcast Corp., the cable company that took control of NBC Universal Inc. last month, reported fourth-quarter profit and sales that beat analysts’ estimates and plans to boost its dividend and stock buyback program.

Profit, excluding costs from the purchase of NBC Universal, was 35 cents a share. Analysts in a Bloomberg survey predicted 32 cents on average. Sales rose 7.2 percent to $9.72 billion, topping projections of $9.56 billion.

“Comcast beat all financial metrics, including and excluding NBC’s transaction costs,” said Marci Ryvicker, an analyst at Wells Fargo Securities LLC in New York. “Bottom line, great quarter, nice capital returns.”

Completing the NBC Universal deal gives Comcast’s financial position greater clarity, said Tom Eagan, an analyst at Collins Stewart LLC in New York. Last year, the largest U.S. cable company lagged behind Time Warner Cable Inc. and Cablevision Systems Corp. in market performance. Investors were concerned regulatory conditions might limit the upside of the NBC venture.

The Philadelphia-based company boosted its dividend to 45 cents a share annually from 38 cents and accelerated its share repurchase program, committing to buy back $2.1 billion of its stock this year. That’s a 75 percent increase from last year, when the company repurchased $1.2 billion of its shares.

“With the NBC Universal deal approved by regulators, funding for the $15 billion in debt secured at attractive rates, we expect the company to be more aggressive about returning capital to shareholders,” Eagan said. “Comcast is much more comfortable with their capital structure then they were 12 and 24 months ago.”

Biggest Media Company

Comcast’s previous dividend yield was one of the lowest among large media companies, Eagan said.

Comcast rose 97 cents, or 4 percent, to $25.13 at 4 p.m. New York time in Nasdaq Stock Market trading. The shares have gained 14 percent this year.

Comcast’s NBC joint venture, combined with its existing cable business, gives Chief Executive Officer Brian Roberts control of a media company with about $55 billion in combined sales last year, bigger than Walt Disney Co., News Corp. or Time Warner Inc. Still, about 70 percent of Comcast’s combined revenue will be derived from its cable systems, which outperformed expectations in the fourth quarter.

Comcast’s average revenue per customer increased 11 percent to $133.43 a month. The company is raising prices and persuading customers to pay them by expanding its lineup of high-definition programming and the number of TV shows that can be watched online. It’s also signing up more subscribers to high-speed Internet service and digital video recorders.

Networks, Stations, Studios

Comcast netted 698,000 new customers, or revenue generating units, more than the 310,000 Eagan predicted and 414,000 Ryvicker estimated. The growth was driven primarily by high-speed Internet additions. The company lost 135,000 basic cable-TV subscribers, fewer than the 190,000 that Eagan predicted. This indicates that the fundamentals of the cable industry may be rebounding from most of 2010, when it set a record in subscriber losses for basic cable, Eagan said.

Last month, Comcast completed its purchase of a 51 percent stake in General Electric Co.’s NBC Universal, giving the largest U.S. cable company the NBC television network, broadcast stations, cable channels such as MSNBC and USA Network, Universal Studios with its library of more than 4,000 movies, and part ownership of the online video site Hulu LLC. Comcast will report NBC’s earnings in the first quarter.

Sports Programming

“One of the advantages of waiting 13 or 14 months to get a deal closed due to regulatory approval is you get a chance to really get to know the assets, really get to know the people, and get a chance to create a set of goals and plans an priorities for the future,” Steve Burke, NBC’s newly appointed CEO, said in Comcast’s conference call today.

Comcast will look to continue to grow NBC’s cable channels, and to improve the company’s broadcast network, especially in primetime, Burke said.

“We’re here to make money, and we’re going to be disciplined,” Burke said, regarding the prospect for bidding on sports programming. “We’re going to concentrate on businesses that have good returns.”

NBC has the rights to the summer Olympic Games in London in 2012, and, under the guidance of former CEO Jeffrey Zucker, had plans to bid for the 2014 and 2016 games.

Jeff Immelt, CEO of General Electric, said the Olympics had become a “no margin” business and contributed to the media company’s operating loss last year. NBC executives at the time said they didn’t anticipate the deep recession and its impact on advertising when they paid about $2 billion for the TV and online media rights to both the 2010 and 2012 Olympic Games. That price was nearly a 50 percent more than it paid for prior games.

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