Will States Challenge to Merger Hurt Comcast (CMCSA)?

NEW YORK (TheStreet) -- Comcast  (CMCSA) is facing pushback from state legislatures concerning its proposed merger with Time Warner Cable  (TWC). Comcast was up 0.8% at $50.30 in early trading Thursday.

Florida, along with other states, announced that it was joining the Justice Department investigation into whether the merger of two of the top four cable companies in the U.S. was legal under anti-trust laws. The proposed $45.2 billion deal would allow Comcast to boast a subscriber base of 30 million Americans while also making it the internet provider to a third of the country.

State opposition includes new legislation in New York State that could hurt the merger as reported by the New York Post. New York legislators are discussing plans to amend rules to give its cable regulators more power and would require Comcast to prove to the New York State Public Service Commission that the merger was in the best interest of the people of the state.

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TheStreet Ratings team rates COMCAST CORP as a Buy with a ratings score of A+. TheStreet Ratings 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 revenue growth, solid stock price performance, growth in earnings per share, increase in net income and attractive valuation levels. We feel these strengths outweigh the fact that the company shows weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • CMCSA's revenue growth has slightly outpaced the industry average of 4.2%. Since the same quarter one year prior, revenues slightly increased by 6.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • COMCAST CORP has improved earnings per share by 28.6% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, COMCAST CORP increased its bottom line by earning $2.56 versus $2.29 in the prior year. This year, the market expects an improvement in earnings ($5.74 versus $2.56).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Media industry average. The net income increased by 26.0% when compared to the same quarter one year prior, rising from $1,518.00 million to $1,913.00 million.
  • You can view the full analysis from the report here: CMCSA Ratings Report
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