Comcast 4Q Earnings Preview: Peacock Network NBC Lifts Philly’s Cable Giant

Comcast Corp. (Nasdaq:CMCSA) is expected to report higher fourth-quarter and full-year profits on Wednesday as NBC dominated broadcast ratings and the country’s largest cable provider saw double-digit gains in advertising and business-services revenue.

Analysts polled by Thomson Reuters expect the Philadelphia-based telecom giant to report net income of $1.42 billion, or 53 cents a share, up 12.8 percent from $1.3 billion, or 47 cents per share, for the same period last year. The company is expected to report revenue of nearly $16 billion, compared with $15.04 billion in the year-earlier quarter.

For fiscal-year 2012, analysts expect Comcast to report net income of $5.22 billion, or $1.93 per share, compared with $4.38 billion, or $1.58 per share, last year. The company is expected to report annual revenue of $62.49 billion, compared with $55.84 billion last year. Comcast reports on Wednesday before the opening bell.

In 2012, Comcast had the best performing stock in the pay-TV industry, noted Amy Yong, an analyst with Macquarie Capital. Its stock was up 58 percent for the fiscal year, followed closely by Time Warner Cable (NYSE:TWC) at 53 percent. Yong said that performance will be tempered by slower growth at NBCUniversal’s Universal Studios for the quarter that ended Dec. 31.

“In general, Comcast has the best pricing power in the industry,” Yong said, “and NBC has continued to improve, although film and theme parks will be weaker this quarter.”

Movie releases from Universal Pictures were a mixed bag. Eli Roth’s “The Man With the Iron Fists,” released on Nov. 2, barely broke even, taking in a domestic gross of $15.6 million on a reported $15 million budget. However, two awards-season releases -- Judd Apatow’s “This Is 40” and Kathryn Bigelow’s “Zero Dark Thirty” -- performed well, with the latter up for a Best Picture Oscar.

On the small screen, Yong noted that NBCUniversal is showing signs of a turnaround, thanks to improved ratings at NBC and cable networks such as Syfy, Bravo and E! starting to “bear fruit” thanks to rebranding efforts. In particular, Bravo, with its stable of reality offerings including the “Real Housewives” franchise, has proved an asset. The network now ranks tenth in ad-supported cable TV and has enjoyed seven consecutive years of ratings growth. However, Michael Nathanson, an analyst with Nomura, pointed out in a Jan. 15 research note that ratings across NBCUniversal’s cable networks were down 14.4 percent in the key 18 - 49 demographic, the lowest dip out of any of the Big Six media companies.

It was a different story on broadcast, where NBC went from third to first place in the ratings, with a 15.3 percent increase compared with the same period last year. The Peacock followed its Olympics-fueled summer ratings bonanza with continued momentum through the fourth quarter thanks to hit shows such as “The Voice” and “Revolution.” Another boon for NBC was “Sunday Night Football,” which netted big numbers throughout the quarter. The Dec. 31 game between the Dallas Cowboys and the Washington Redskins attracted more than 30 million viewers alone, making it the most-watched NFL regular-season prime time game ever to air on NBC.

Lagging DVD sales continue to drag down the unit, however. In November, NBCUniversal began a sizable round of layoffs, cutting a reported 450 to 500 jobs, many from Universal Studios’ home entertainment division.

Vikash Harlalka, an analyst with ISI Group, expects Comcast to report $5.7 billion in fourth-quarter revenue for NBCUniversal, a 7.9 percent increase over the year-earlier period. Expected growth is about on par with revenue from the company’s larger Cable Communications unit, which Harlalka expects to increase 7.5 percent to $9.5 billion. The unit offers video, high-speed Internet and voice services to residential and business customers.

Although home security is still a relatively small segment for cable providers, the growing success of Comcast’s Xfinity -- now available for 95 percent of Comcast customers -- has analysts optimistic about growth potential in that area. “ADT is the largest [home security] player with 6.7 million customers,” Yong wrote, “but we expect Comcast and Time Warner Cable will gain share rapidly as they leverage their customer relationships.”

Analysts are mostly optimistic about Comcast, which has reported higher profits for the last three quarters, with percentages in the double digits. Out of 23 analysts, 14 rated Comcast stock a Buy. The mean estimate was Overweight, but still better than any of Comcast’s pay-TV competitors. “We believe Comcast is best positioned to mitigate the pressures of rising programming costs, emerging players and new technologies,” Yong wrote.

Comcast shares fell 11 cents to $38.64 on Monday.

[Update 4:55 pm] Comcast announced on Tuesday that it is buying General Electric’s 49 percent stake in NBCUniversal for $16.7 billion. The company had purchased a majority stake in 2011, entering into a joint agreement. Many analysts predicted a buyout would occur this year.