This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Comcast's Spending Spree Raises Eyebrows on Street

The rebuilds are over for Comcast (CMCSA). But the capital expenditures aren't going away as quickly as some investors would like.

The nation's largest operator of cable systems -- a company not in the habit of springing unwelcome financial surprises on Wall Street -- caused a minor disturbance Thursday with higher-than-expected fourth-quarter capital expenditures and capex forecasts on the high side of prior indications.

The capex issue on Thursday revived longtime concerns about the cable industry's ability to generate free cash flow -- that is, cash flow from operations after interest expense and capital expenditures have been subtracted out.

Over the past few years, free cash flow growth at Comcast and at other cable operators has been hampered by capital spending on upgrading the cable plant to a two-way, interactive, fiber-optic-laden cable infrastructure.

Operators have promised not only that capital expenditures would decline as a result, but also that they won't have to rebuild their rebuilds.

But while capital expenditures devoted to rebuilding have come down, they appear to have popped up in other areas -- for example, the purchase of souped-up cable boxes featuring digital video recorders. Comcast, which had forecast $3.3 billion to $3.4 billion in capital expenditures for 2004, says it overshot the high end by $200 million mainly because of a fourth-quarter purchase of advanced set-top boxes.

Comcast shares closed Friday at $32.13, up 17 cents from where they closed on the eve of the Thursday earnings release.

Articulating the capex concerns Friday -- but taking issue with them -- was Doug Shapiro of Banc of America Securities.

In a report issued Friday, Shapiro cited capex concerns as the apparent reason that Comcast's shares didn't rise more than they did in the wake of Thursday's numbers.

"The guidance of $3 billion in 2005 was a little higher than our prior estimate of $2.85 billion," wrote Shapiro. "It was at the high end of the $2.5 billion-$3 billion range provided early in 2004, and we believe it was also near the top end of the Street range (apparently some analysts were still near $2.5 billion)."

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,172.68 -107.06 -0.62%
S&P 500 1,994.29 -16.11 -0.80%
NASDAQ 4,527.6890 -52.10 -1.14%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs