Comcast Corp (CMCSA) Earnings Preview: Higher Profits In Q1 2013 Amid Acquisition Of NBCUniversal

Comcast Corp. (Nasdaq:CMCSA), the country’s largest cable provider and a newly minted media conglomerate, is expected to report higher first-quarter profits on Wednesday, driven by double-digit revenue growth in high-speed Internet services and a 2 percent jump in revenue for its recently acquired NBCUniversal Media LLC.

Analysts polled by Thomson Reuters expect the Philadelphia-based company to report net income of $1.63 billion, or 62 cents a share, up from $1.2 billion, or 45 cents per share, a year earlier. Revenue is expected to rise 3.6 percent to $15.4 billion. Comcast will report results before the market opens. 

Comcast began the quarter with the surprise announcement that it was purchasing General Electric’s (NYSE:GE) 49 percent stake in NBCUniversal, the media and entertainment entity that owns the NBC broadcasting network and the Universal Pictures movie studio, along with Universal Parks & Resorts and a stable of cable networks and other media properties. The deal, valued at $16.7 billion, came almost two years sooner than expected, signaling a desire by Comcast’s chief, Brian L. Roberts, to speed up the process of turning Comcast into its own media ecosphere -- controlling both content and delivery.

Comcast first purchased a stake of 51 percent in NBCUniversal in early 2011, marking its transition from a cable provider into a diversified media conglomerate. Analysts say the full purchase, which was finalized on March 19, will shore up Comcast’s long-term stake in the media property as well as produce immediate results.

Nomura analyst Mike McCormack said in a research note at the time of the announcement that he expected Comcast's acquisition of GE's stake in NBCUniversal to add to both earnings and free cash flow. He added that the transaction also "improves Comcast’s ability to invest across both NBCU and cable.”

Revenue for NBCUniversal would seem to validate that assessment, and the unit is expected to record $5.58 billion for the period ended March 31, Vijay Jayant, an analyst with ISI, predicts. Cable networks and filmed entertainment are expected to see revenue gains of more than 5 percent, while revenue for the theme parks division is expected to rise 2 percent.   

However, broadcast television revenue, which includes NBC, took a hit for the quarter, with an estimated 5.6 percent drop, according to Jayant. That decline will come as no surprise to anyone who had noticed Jay Leno’s nightly ridiculing of the Peacock network’s dismally low ratings, a display that reportedly angered NBC Entertainment chief Robert Greenblatt.

In February, NBC’s ratings plummeted to last place, behind not only its broadcast rivals -- ABC, CBS and Fox -- but also the Spanish-language network Univision. It was the lowest decline ever for a major broadcast network, a dubious milestone that also speaks to an increasingly crowded entertainment climate. It didn’t help that NBC has only one true ratings hit: the singing competition “The Voice.”

Despite such struggles, analysts are hopeful for an NBC recovery, one driven in part by the network’s aggressive moves to maximize its content across digital platforms. In a February research note, Amy Yong, an analyst at Macquarie, cited several online video agreements that NBCUniversal recently signed, including deals with Amazon.com Inc. (Nasdaq:AMZN), Google Inc. (Nasdaq:GOOG) and Barnes & Noble Inc. (NYSE:BKS). Comcast also renewed agreements with Apple (Nasdaq:AAPL), Hulu and Blockbuster, which is owned by DISH Network (Nasdaq:DISH).

“We continue to see Comcast as a long-term winner given its superior cable metrics and ability to benefit from improving ad trends and the turnaround of NBC broadcast,” Yong wrote.

Comcast shares closed Monday at $41.49, up 29 percent.

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