(CMCSA) Earnings Preview: Comcast Corporation

Comcast Corp. (CMCSA) is slated to release its fourth quarter 2011 results on Wednesday, February 15, 2012, before the opening bell. The current Zacks Consensus Estimate for the fourth quarter is pegged at 42 cents per share, representing an annualized growth of 24.82%.

With respect to earnings surprises over the trailing four quarters, Comcast has outperformed the Zacks Consensus Estimate in three of the last four quarters. The average earnings surprise was a negative 0.73%.

Third Quarter Recap

On November 2, 2011, Comcast reported its third quarter 2011 financial results. Total revenue came in at $14,339 million, up 51.1% year over year, and surpassed the Zacks Consensus Estimate of $14,220 million. Both Cable Communications and NBC Universal segments generated solid revenue growth.

GAAP net income for the third quarter of 2011 was $908 million or 33 cents per share compared with $867 million or 31 cents per share in the prior-year quarter. However, quarterly EPS of 33 cents was significantly below the Zacks Consensus Estimate of 40 cents. This was primarily attributable to higher interest charges and taxes along with a $256 million year-over-year decline in investment income.

Operating margin in the third quarter of 2011 was 18.4% compared with 20.6% in the prior-year quarter.

Agreement of Estimate Revisions

In the last 30 days, out of the 16 analysts covering the stock, one analyst increased the EPS estimate for the fourth quarter of 2011 while two reduced the same. Similarly, for the first quarter of fiscal 2012, out of the nine analysts covering the stock, none revised their estimate.

For fiscal 2011, in the last 30 days, out of the 13 analysts covering the stock, one analyst raised the EPS estimate but two slashed the same. Likewise, for fiscal 2012, out of the 19 analysts covering the stock, three analysts increased the EPS estimates while three moved in the opposite direction.

Magnitude of Estimate Revisions

During the last 30 days, the current Zacks Consensus Estimate was just a penny below the previous estimate of 43 cents for the fourth quarter of 2011 while for the first quarter of 2012; the current Zacks Consensus Estimate was in line with the previous estimate of 42 cents. However, for fiscal 2011, the current Zacks Consensus Estimate was just a penny below the previous estimate of $1.53. Likewise, for fiscal 2012, the current Zacks Consensus Estimate was just a penny above the previous estimate of $1.87.

Earning Surprises

The current Zacks Consensus Estimates for the ongoing quarter and the first quarter of 2012 contain 2.38% upside potential (essentially a proxy for future earning surprises). Similarly, for fiscal 2011 and 2012, the Zacks Consensus Estimate upside potential is 0.00% and 1.06%, respectively.

Our Recommendation

Comcast is all set to become a media powerhouse armed with its unique control over both content and distribution after completing the acquisition of a controlling stake in NBC Universal. The company is also aggressively deploying the DOCSIS 3.0 (also called Wideband) technology to upgrade its existing customers to high-speed network together with all digital networks.

However, we believe that Comcast is fairly valued at current levels as the stock price has moved up by a whopping 56% last year. Moreover, stiff competition from formidable rivals like Time Warner Cable (TWC) and other satellite operators like DIRECTV (DTV) and DISH Network Corporation (DISH) will most likely make the market highly competitive.

We maintain our long-term Neutral recommendation on Comcast. Currently, Comcast has a Zacks #3 Rank, implying a short-term Hold rating on the stock.

COMCAST CORP A (CMCSA): Free Stock Analysis Report

DISH NETWORK CP (DISH): Free Stock Analysis Report

DIRECTV (DTV): Free Stock Analysis Report

TIME WARNER CAB (TWC): Free Stock Analysis Report

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