Comcast Corporation (CMCSA) 1Q Earnings: Here’s What to Expect

Comcast Corporation 1Q Earnings: Here’s What to Expect
Comcast Corporation is scheduled to post its 2Q earnings, after hooking up with DreamWorks Animation SKG Inc. in a $3.8 billion deal during the period

Comcast Corporation (NASDAQ:CMCSA) is all set to announce its second quarter earnings for fiscal 2016 (2QFY16) on Wednesday, July 27. The investors are waiting to see if the media giant will be able to report higher-than-expected earnings or not.

According to previous financial performance of the Philadelphia-based mass media company, it has shown mixed earning results. The media giant missed earnings estimates in three out of the four quarters of last year. However, in the last reported quarter, the company stated the earnings per share (EPS) of $0.84 surpassing the analysts’ consensus of $0.79. Following the earnings, the stock went up 0.41%.

Despite analysts concerns regarding tumbling Comcast’s sales due to cord cutting, which means subscribers are getting rid of their cable TV subscriptions and moving toward online streaming services, Comcast revealed its largest quarterly increase in its Pay-Tv subscribers in past nine years in the last reported quarter. The media giant revealed that its high-speed Internet subscribers also surged by 438,000. This was marked as segment’s best first quarter in past four years.

For the second quarter, analysts predict that sales and profit both will fall on year-over-year basis. They forecast that the company will earn EPS of $0.81 per share, as compared to $0.84 it had in the same quarter a year ago. Revenue is forecasted to come in at $19 billion for the period, up from last year’s value of $18.74 billion.

Recent report by The Wall Street Journal revealed that the media giant is introducing a new pay-as-you-go cable service. Customers are required to pay a one-time equipment setup fee and can “refill” their service without limitations on the number of times they can renew. It requires no credit check, appealing to lower-income homes.

The media company also plans to add a new service in order to allow its users to access its content through Smart TV's and devices such as Roku boxes. Executive VP Chris Satchell believes that with this move, the media giant will be able to mix cable and Internet services with this move.

Some analysts predict weaker results at NBC Universal's film segment and in broadcast advertising. However, the entertainment company is anticipated to lose its video subscribers. During the second quarter, the giant media company’s NBC Universal finally received approval from US Justice Department for its $3.87 billion acquisition of its rival Dream Works Animation for $3.8 billion.

In April, Comcast, the owner of Universal Pictures and cable networks including USA and Bravo agreed to purchase DreamWorks, which is run by CEO Jeffrey Katzenberg, for $41 a share. This purchase of DWA by Comcast is likely to give an immediate boost to its entertainment business due to DWA’s well-established animation studio along with its substantial animated content library. In addition, NBCUniversal will also own DreamWorks Animation’s consumer products business, which monetizes its franchises.

This month, Comcast announced a deal with the US streaming giant Netflix to allow its customers to stream Netflix content through their Comcast’s latest cable boxes set-top box exactly like a normal cable channel. This deal is the result of year full of discussions. Under the agreement, the new system will incorporate Netflix into the X-1 box, which Comcast has publicized as its “next-gen” platform for continuous viewing experience.

Under the agreement, the new system will incorporate Netflix into the X-1 box, which Comcast has publicized as its “next-gen” platform for continuous viewing experience.

Recently, analyst Andy Hargreaves at Pacific Crest Securities raised his estimate of Comcast’s share of Hulu through 2017.

He said in the research note: "Competition from online services is likely to increase in 2017, but we believe Comcast's product improvements position it to compete effectively against this."

However, the media giant and cable company has managed to recover with aggressive agreements for new sign ups, a revamped customer service strategy.

In the earnings call, investors should also look for the company’s full year guidance for the fiscal 2016 and the strategy that the fast casual restaurant chain is expected to follow.

In a recent research note to its clients, Wunderlich analyst Matthew Harrigan stated that one should not expect too much excitement out of media company’s 2Q earnings.

He wrote: “We expect middling results for buy-rated Comcast given the second-quarter seasonal nadir in the cable biz and weak film results against product last year that included ‘Jurassic World,’ ‘Furious 7’ and ‘Pitch Perfect 2’.”

According to the analyst, the major obstacle for the giant media company is most likely be the year-over-year comparisons for its film studio unit and feeble box office performances in its 2Q, specifically its $47.17 million domestic draw for “Warcraft.”

For the upcoming third quarter, the analyst is bullish on Universal Pictures’ line up, and ever more so when looking ahead to 2017. Also in the next quarter, Comcast is likely to reap benefit from the 2016 Summer Olympics in Rio, which is all set to get broadcast on NBC.

Mr. Harrigan wrote: “Despite all the Rio flack over venues, zika and Russian doping, NBC expects 15% increase in ad sales.”

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