Comcast: Good Results, But Shares Too Pricey

Comcast’s cable business continues to post impressive results, steadily increasing its customer base at the expense of its phone rivals. The firm added 156,000 net customer relationships during the quarter, up from 82,000 added a year ago. Within the product segments, Comcast lost 48,000 television customers during the quarter, another sharp improvement from the prior year (81,000 net losses), while net Internet-access customer growth accelerated to 320,000, up from 315,000 a year ago, marking the best third-quarter performance since 2009. Deployment of the X1 platform accelerated during the quarter, and about 25% of television customers now use the service, which is far superior to Comcast’s legacy television product. In addition, the firm continues to press its Internet-speed advantage, with nearly three fourths of its customers receiving 50 megabit service or better.

Universal's fantastic performance at the box office fueled 20%-plus revenue growth at NBCU for the second consecutive quarter. Studio revenue will likely decline from here as the movie slate takes a breather, but the firm has clearly built additional franchise value during the past year. On the negative side, cable ad revenue remains weak, with its 2% growth resulting from NBCU’s new deal with NASCAR. The cost of NASCAR rights and other programming investments pulled the margin for the cable network segment down 4 percentage points to 34.6%. We continue to believe that trends in the cable networks warrant careful attention, as this segment drives nearly two thirds of NBCU profits.

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