Yesterday, after the closing bell, Comcast Corp. (CMCSA) reported its fourth-quarter 2012 financial results, which fell below the Zacks Consensus Estimates. However, in the after market trade on NASDAQ, the stock price of Comcast was up $2.78 (7.13%) to $41.75. We believe there are three reasons for the share price increase: (1) Despite missing the Zacks Consensus Estimates, the year-over-year financial growth was strong, (2) The company’s decision to acquire the remaining 49% stake of NBC Universal from General Electric Co. (GE) and (3) Significant hike in shareholders’ wealth. Comcast currently has a Zacks Rank #3 (Hold).
Fourth Quarter Results in Details
GAAP net income for the fourth quarter of 2012 was $1,518 million or 56 cents per share, compared with net income of $1,287 million or 47 cents per share in the prior-year quarter. However, quarterly adjusted earnings per share of 52 cents were a penny shy of the Zacks Consensus Estimate. Total revenue came in at $15,937 million in the reported quarter, up 6% year over year, but fell below the Zacks Consensus Estimate of $16,022 million.
Quarterly operating costs and expenses were $10,660 million, up 5.3% year over year. However, quarterly operating income was $3,294 million, representing an annualized growth of 12.9%. Operating margin, in the fourth quarter of 2012, was 20.7% against 19.4% in the prior-year quarter. During the reported quarter, Comcast repurchased 21.1 million of its common shares for a consideration of $750million and paid dividends totaling $432 million.
During the fourth quarter of 2012, Comcast generated $5,277 million of cash from operations compared with $4,916 million in the year-ago quarter. Consolidated free cash flow in the reported quarter was $1,832 million, compared with $1,876 million in the prior-year quarter. Cash and cash equivalents, at the end of 2012, were $12,415 million compared with $1,674 million at the end of 2011. Total debt at the end of 2012 was approximately $40,458 million compared with $39,309 million at the end of 2011. At the end of 2012, debt-to-capitalization ratio was 0.43 compared with 0.44 at the end of 2011.
Cable Communications Segment
Quarterly total revenue was $10,132 million, up 7% year over year. Operating cash flow was $4,021 million, up 6.7% year over year. Within this segment, Video revenue was $5,043 million, up 2.9% year over year. High-Speed Internet revenue was $2,438 million, up 8.7% year over year. Voice revenue was $895 million, up 1.4% year over year. Advertising revenue was $652 million, up 19.4% year over year. Business Services revenue was $660 million, up 32.4% year over year. Other revenue was $444 million, up 11.1% year over year.
As of Dec 31, 2012, Comcast had 19.367 million (up 6.7% year over year) High-Speed Internet customers; 9.955 million (up 6.6% year over year) Voice customers; and 21.995 million (down 1.5% year over year) Video customers. In the reported quarter, Comcast lost a net total of just 7,000 video customers compared with a net loss of 17,000 customers in the prior-year quarter. The company added a net 341,000 High-Speed Internet customers compared with 336,000 in the year-ago quarter. Similarly, Comcast added a net total of 168,000 voice customers compared with 146,000 in the prior-year quarter. In the previous quarter, monthly ARPU from video customers increased 8.7% to $153.54.
NBC Universal Segment
Quarterly total revenue was $6,014 million, up 4.8% year over year. The segment’s pro forma operating cash flow was $1,172 million, up 11.4% year over year. Within this segment, Cable Networks revenue was $2,218 million, up 0.6% year over year. Broadcast TV revenue was $1,986 million, up 7.9% year over year. Alongside, Filmed Entertainment revenue was $1,381 million, up 9% year over year. Theme Parks revenue was $520 million, up 4.5% year over year.
In a major strategic move, Comcast decided to purchase the remaining 49% stake of NBC Universal from General Electric for a total consideration of $16.7 billion. Additionally, Comcast will also buy GE Capital's properties at 30 Rockefeller Plaza in New York City and CNBC's headquarters in Englewood Cliffs, N.J., for about $1.4 billion. Comcast will utilize $11.4 billion of its liquid cash to fund the deal together with issuing $4 billion of senior unsecured notes to General Electric, $2 billion in credit facility borrowings and issuing $725 million in subsidiary preferred stock to General Electric. With NBC Universal in its kitty, we believe that Comcast will become a major competitor to The Walt Disney Co. (DIS).
The board of directors of Comcast has decided to raise its annual dividend payment rate by a whopping 20% from 65 cents per share to 78 cents per share. In addition, the board also decided to repurchase $2 billion worth of its own common share in 2013.
Yesterday, Comcast formed a deal with Fox Networks of News Corp. (NWSA) to distribute Fox’s programming to its Xfinity customers. Xfinity is the TVEverywhere service of Comcast and consequently its subscribers will be able to watch Fox Networks on TV, PC, smartphones and tablets.
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