Comcast Posts Solid Quarter

The cable company surpasses second-quarter targets and says it's on track to grow 10% this year.
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Updated from 7:46 a.m.

Comcast

(CMCSA) - Get Report

beat Wall Street's second-quarter estimates and reaffirmed full-year guidance Tuesday, posting solid gains in its core cable business.

The Philadelphia-based cable operator earned $430 million, or 19 cents a share, up from the year-ago $262 million, or 12 cents a share. Revenue for the quarter ended June 30 rose to $5.6 billion from $5.07 billion a year ago. Analysts surveyed by Thomson First Call had been expecting a 15-cent profit on revenue of $5.54 billion.

The company said revenue rose 10.5% from a year ago, driving a 23% rise in operating income to $1 billion and a 13% surge in operating cash flow to $2.2 billion. Comcast said the operating cash flow margin at its cable unit was the highest in two and a half years.

Prudential media analyst Katherine Styponias said Comcast's quarter looked pretty rosy. Tuesday she wrote, "Overall subscriber numbers were stronger than our expectations, with Comcast adding 507,000 net revenue-generating units in the quarter," beating Prudential's 454,000-add target. She rates the stock overweight and Prudential makes a market in the stock.

Comcast Cable added 284,000 new digital customers in the second quarter of 2005 and with more than 9.1 million subscribers, digital cable penetration reached 42.6% of basic subscribers. Basic subscribers were essentially unchanged from a year ago at 21.4 million, and declined seasonally by 77,000 or 0.2% from the first quarter of 2005.

Comcast Cable deployed nearly 300,000 advanced set-top boxes with DVR and/or HDTV programming capability. High-speed Internet service revenue increased 28.8% to $982 million, reflecting a 28.3% increase in subscribers and strong average revenue per subscriber. Comcast Cable ended the second quarter of 2005 with more than 7.7 million high-speed Internet subscribers, adding 297,000 subscribers during the second quarter of 2005 for a penetration rate of 18.9% of available homes. Average monthly revenue per high-speed Internet subscriber of $43.34 in the second quarter of 2005 was in line with the second quarter of 2004 and increased 53 cents from the $42.81 reported in the first quarter of 2005.

Comcast Cable added 15,000 Comcast Digital Voice customers, reflecting the rollout of CDV in new markets late in the second quarter. As expected, CDV customer additions were offset by a decline in the number of Comcast's circuit-switched telephone customers as Comcast transitions to marketing Comcast Digital Voice. Comcast Cable reported 2,000 net new phone customers in the second quarter of 2005.

The company also reaffirmed full-year guidance, calling for revenue growth of 10% and operating cash flow growth of 14%-15%.

Styponias noted that digital subs gains were better than expectations, but digital phone user growth came in lighter than the firm forecast. Comcast's gain of 284,000 new digital customers beat Prudential's expectation of 184,000, and its 297,000 high-speed adds was just short of the firm's expected 338,000-user gain. But the phone side only yielded 3,000 net new subs, well short of Prudential's expectation of 15,000 additions.

The news comes as Wall Street places increasing importance on the communications industry's so-called triple threat of consumer services, meaning the ability to offer phone, cable TV and high-speed Internet service on one bill.

Asked about a refashioning of cable channel Outdoor Life Network, which has recently achieved more mainstream success with its airing of the popular Tour de France bicycle race, executives on the call stressed that they are not looking to take on some other network --

Disney's

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ESPN comes to mind. Instead, they are looking to be opportunistic in terms of making the network more valuable by increasing its distribution. That would certainly be accomplished were Comcast to secure some National Football League and National Hockey League rights in the near future.

Early Tuesday, Comcast was up 49 cents at $31.10.