Faltering Earnings Momentum at Comcast - Analyst Blog

Comcast's (CMCSA) earnings outlook appears far less robust than in the recent past. The cable giant is scheduled to report fourth-quarter 2009 results on February 3. The current Zacks Consensus Estimate for the quarter is 27 cents, which has seen no revisions in the last three months. Stability comes to mind when we look back at the company's results in the last quarter of 2008, when it earned the same amount (27 cents). We do not see any surprises this quarter, with earnings expected to be exactly in-line with the current Zacks Consensus.

But Comcast's quarterly results were not always this devoid of surprises. In the third quarter, the company beat the Zacks Consensus Estimate by 12%, which was towards the lower end of its positive quarterly surprises in the preceding three quarters. The average surprise for the last four quarters (including the third quarter of 2009) is an impressive 18.4%. But that is history, in our view. Over the coming quarters, we expect earnings surprises to be either non existent or towards the downside.

Estimates of the company's earnings appear to have discounted the aggressive deployment of the DOCSIS 3.0 technology to upgrade its existing customers to high-speed network, recent rolling out of a nationwide on-demand, web-based TV Everywhere service, and Comcast’s decision to acquire controlling stake in NBC Universal, which awaits regulatory approval.

In line with those moves, the company recently decided to upgrade its 48 analog cable channels to digital network. The company has undertaken a plan for a nationwide upgrade of its analog cable network to digital network in order to free bandwidth. One analog channel takes up the same amount of bandwidth as 10 digital channels or 3 high-definition (HD) channels. Comcast has also undertaken a project to reclaim 40 to 50 of its existing analog channels to free up spectrum for its high-speed DOCSIS 3.0 (wideband) network.

As residential VoIP and HDTV services continue to grow, communications service providers are dealing with increased network traffic driven by strong demand for video download and file sharing. This massive requirement for data transport has encouraged cable operators seeking to improve their transport offerings. Rival cable MSOs of Comcast, like Time Warner Cable Inc. (TWC) and Cablevision Systems (CVC), are also making similar changes.

There's a lack of estimate revisions, in either direction, in the company's Zacks Consensus Estimate for 2010 as well, which is at $1.20. That's unchanged in the last 60 days. If the company's results for 2010 come inline with the Zacks Consensus, it would imply an almost flat performance. This deceleration in the company's earnings growth is reflected in its Zacks #3 Rank ('hold') and Neutral recommendation.

Read the full analyst report on "CMCSA"
Read the full analyst report on "TWC"
Read the full analyst report on "CVC"
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