Comcast Corp. (CMCSA) posted stronger-than-expected third quarter earnings Thursday as the biggest U.S. cable company prepares to take on Disney (DIS) and Netflix (NFLX) in the global streaming market following its $40 billion takeover of Britain's Sky Plc (SKYAY) .
Comcast said adjusted earnings for the three months ended in September came in at 65 cents a share, topping analysts forecasts and rising 27.5% from the same period last year. Group revenues, the company said, rose 5% to $22.13 billion, again ahead of the consensus forecast, while cable revenues were up 3.4% to $13.8 billion.
"This is an exciting and important time in Comcast's history," said CEO Brian Roberts. "NBC finished the 52-week season ranked #1 in total viewers for the first time in 16 years and #1 in adults 18-49 for the fifth consecutive season, and is off to a great start in the new season. Our recently completed acquisition of Sky is transformative for our company, helping create a unique global leader in media, technology, television and broadband."
Comcast shares rose nearly 5% to $35.80 on Thursday. For the year, Comcast is down about 11%.
NBCUniversal revenue rose 8.1% from the same period last year to $8.63 billion, Comcast said, while quarterly internet additions came in at 363,000, well ahead of the 294,000 forecast. Around 106,000 customers were lost to rivals such as Netflix and AT&T (T) , company data indicates, but that was less than the Street's 152,000 forecast.
Comcast split the call into two parts, each with separate analyst Q&As. The first section focused on the quarter and the second on the Sky acquisition.
Broadband net adds in the third quarter were the best in 10 years, Roberts touted, while Comcast surpassed a million wireless subscriptions in the third quarter. The company suggested that the growth of virtual cable operators such as Alphabet's (GOOGL) YouTube TV and Hulu Live is starting to plateau.
Meanwhile, the mid-terms elections are generating strong advertising for NBC. "We're having a very, very strong political [season]," Roberts said. "It looks more like a presidential year than a mid-term year."
In the second part of the call, Roberts addressed the $40 billion price tag for Sky and suggested that the European pay-TV company had been undervalued before Comcast's bidding war with Fox (FOXA) and Disney.
"You never know exactly how securities are priced and what the motivating factors are," Roberts said. "I do think it was mispriced." The Comcast CEO suggested that five years of "M&A flux," Fox's large position in the company and regulatory uncertainty had depressed Sky shares.
Roberts put the price into context of the simultaneous bidding for much of Fox, which Disney acquired for $71.3 billion. "Disney bid 10% less [for Sky] and that's exactly the amount we bid less than they did on Fox," he noted.
Sky CEO Jeremy Darroch laid out some of the opportunity in Europe. The company's territory includes 118 million households, and has just 34% market penetration. That leaves 78 million households without pay-TV in its territories. "If Sky captured 10% of that headroom we'd grow by eight million households," he said.
Comcast said earlier this month it would pause its stock buyback program next year as it focuses on debt reduction in the wake of its $40-billion acquisition of Sky. CFO Michael Cavanagh declined to give a time frame for when it would resume buying back stock. "We'll take it one year at a time," he said.
Comcast said it would buy back around $5 billion in shares over the course of 2018, according to a Securities and Exchange Commission filing. As of December 31, 2017, Comcast had $7 billion available under its share repurchase authorization.
Last month, Comcast effectively gained complete control over Sky, Europe's biggest pay-TV broadcaster, when Fox agreed to sell its 39% stake, ending one of the longest takeover battles in U.K. history and creating what will be the world's largest broadcaster with more than 53 million customers over five countries across the U.S. and Europe.
Comcast, which topped the best-and-final offer of £15.67 from Fox and Disney with a £17.28 bid that valued Sky at £30.6 billion ($40.2 billion), had purchased 36.9% of the outstanding shares over the past three days and will now have complete control of the broadcaster and its 23 million customers.
Disney said it agreed to the sale and would use proceeds from the Sky sale, which is valued at around $15 billion, to pay down debt.