Comcast’s New Numbers Hammer Stocks


Cable stocks were hammered again last week and investors have Comcast to blame.

Comcast — the nation’s largest cable operator, with 24.2 million subscribers — reduced the guidance it gives investors on its full-year results.

The new numbers: Revenue will grow 11% instead of 12% and operating cash flow will be up 13% instead of 14%.

The company also said its capital expenditures would rise by about $300 million for the year to $6 billion.

The changes didn’t appear to surprise analysts who follow Comcast as much as they appeared to shock investors, who drove the stock down by more than 12% ($2.55 per share) last Wednesday, to $18.18 each. Most analysts had reduced their full-year estimates for the company after third-quarter results were released in October.

Comcast’s declines spread. Time Warner Cable shares dipped 4.4% ($1.18 each) to $25.87 on Dec. 5; Cablevision Systems fell 4.2% ($1.13 each) to $25.76; Charter Communications dipped 1.6% (2 cents each) to $1.23 per share. Only Mediacom Communications appeared to escape the sell-off. Its shares were up 14 cents (3.1%) each, to $4.60 per share.

Comcast said its decision to take down guidance was a reflection of increased competition and a sluggish economy.

While the Philadelphia-based operator repeated that it still expects to report double-digit revenue and operating cash-flow growth for the year, the new estimates are just the latest indication that its business is slowing down.

Revenue growth at Comcast has been in a steady decline all year — 12.3% in the first quarter, 11.8% in the second and 11.3% in the third. The new guidance appears to mean revenue should grow about 9.7% in the fourth quarter.

Operating cash-flow growth has also been on a slide, dipping from 14% in the first quarter to 13% in the second and third quarters. Based on the new guidance, growth should be about 12% in the fourth quarter.

In a research note, Pali Research media analyst Richard Greenfield wasn’t buying claims that the economy was one of the main factors for the guidance revision, adding that competition from telephone companies and satellite-TV providers are primarily responsible.

“Comcast simply did not expect the level of competitive marketing spend that has occurred this year,” Greenfield wrote.

At the UBS Securities Media & Communications conference in New York on Dec. 5, Comcast co-chief financial officer Michael Angelakis tried to stem investor fears, stressing that even with the reduced guidance, revenue and cash-flow growth will be in the double-digits for the year.

Angelakis said Comcast will take several steps to rectify its problems — offering lower-priced tiers of service, beefing up HDTV offerings and targeting non-video homes with a double-play package of voice and data.

But Angelakis said that basic subscriber losses are expected to continue at least for the next couple of years. So far this year, Comcast has lost about 85,000 basic customers.

“Over the next few years, we will lose some subscribers,” Angelakis said. “The way we are thinking about it is competition is increasing and we have to respond.”