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Comcast Jumps on First TV Subscriber Gain in Six Years (Update 1)

Updated to include Wells Fargo comments and capex financials in 9th paragraph. 

NEW YORK (TheStreet) -- Comcast (CMCSA - Get Report) was gaining Monday as the largest U.S. cable provider reported an increase in TV subscribers in the fourth-quarter, its first in six years, boosting profits to $1.9 billion, or 72 cents a share.

In its December-ended fourth quarter, Philadelphia-based Comcast managed to increase cable video subscriptions for the first time in 26 quarters as it seeks to capitalize on the transition to net-based entertainment (think YouTube, Netflix (NFLX) and Hulu) over traditional TV networks. Over the quarter, Comcast gained 43,000 new video subscribers, compared to a loss of 129,000 in its third quarter.

Comcast, which also own NBC/Universal, was adding 1.6% to $53.32 in mid-afternoon trading.

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Combined video, high-speed internet and voice customers increased 649,000, a 29% jump in net additions compared to the year-ago quarter. By year's end, customers in the segment totaled 53.1 million, 3.4% higher than in 2012, thanks to increased internet and voice subscribers and reduced video customer losses.

"Cable's operating metrics improved across video, high-speed Internet and voice for both the 4th quarter and full year, with a return to video subscriber growth in the 4th quarter," said CEO Brian L. Roberts in a statement.

Fourth-quarter consolidated revenue across all segments saw a 6.2% year-over-year increase to $16.93 billion, $301 million more than analysts surveyed by Thomson Reuters had expected. Similarly, full-year revenue of $64.66 billion beat consensus by $305 million and jumped 5.8% from fiscal 2012 (excluding artificially-high sales from the 2012 London Olympics and 2012 Super Bowl).

Other revenue streams also surprised. Filmed entertainment revenue, headed by sales of animated film Despicable Me 2, remained strong, up 4.9% to $1.4 billion compared to the year-ago quarter. NBC Universal led an 11.5% gain in broadcast revenue, thanks to increased advertising sales due to strong primetime ratings. Theme park revenue increased 4.6%, driven by higher guest attendance and per capita spending at its Orlando and Hollywood parks.

Better-than-expected subscriber and revenue growth offset slightly-weaker earnings. Quarterly net income of 66 cents a share, though 26.9% higher than the year-ago quarter, missed consensus by 2 cents. Full-year net income of $2.47 a share missed estimates by 3 cents.

Commenting on its performance, Wells Fargo reiterated its "overweight" rating on the stock, noting that management is investing for growth over 2014.

"Management guided cable capital expenditures to ~14% of revenue (vs. our current 13% estimate) in 2014, up from 13% in 2013. Importantly, the increased capex is GROWTH capex (largely focused on the deployment of X1 internet-connected boxes) that has a double-digit IRR [internal rate of return]," analysts wrote in the note.

Comcast increased capital expenditures over the fourth quarter 19.9% to $2 billion, with $1.6 billion reflecting increased spending on digital boxes and wireless gateways for cable communications customers. Over the full year, capital expenditures jumped 15.4% to $6.6 billion with the bulk of funds reinvested in customer premise equipment and the expansion of Business Services and Xfinity Home. 

Over 2013, the Philadelphia-based business distributed $4 billion in dividends and share repurchases. Also, the board approved a quarterly dividend of 22.5 cents a share, a 15.4% increase over prior dividends, payable on April 23 to shareholders of record by the close of April 2. A total $3 billion worth of shares will be repurchased over 2014.

"Our optimism and confidence in the future is demonstrated by our decision to increase our dividend 15% and our plan to repurchase $3 billion of our stock during 2014," said Roberts.

TheStreet Ratings team rates COMCAST CORP as a Buy with a ratings score of A+. The team has this to say about their recommendation:

"We rate COMCAST CORP (CMCSA) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its good cash flow from operations, solid stock price performance, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

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