Comcast reported lower third-quarter earnings compared to a year ago, when the cable giant reported big gains from the acquisition of systems from Adelphia Communications.
Brian Roberts, CEO of Comcast, acknowledged that increased competition and a slowing economy were impacting the company’s growth rate, but said the company continues to increase its revenue and customer base.
Comcast shares fell more than 10 percent and were trading at $21.43, down $2.42, at mid-day.
Net income for the quarter was $560 million, or 18 cents per share, down 54 percent from a year ago, the company said Thursday. Excluding gains from transactions with Adelphia and Time Warner a year ago would reduce year-ago net income to $548 million or 17 cents per share, leaving the current quarter with a 2 percent gain in net income.
Revenues rose 21 percent to $7.8 billion in the third quarter.
“We have transformed our company from a one-product provider of video to become the only company in the world able to offer video, high-speed Internet and phone services to over 40 million households,” Mr. Roberts said. “This provides us with a competitive advantage and will fuel our growth well into the future.”
Mr. Roberts also said that because new services can be provided over the network infrastructure already in place, capital expenditures have peaked relative to revenues. Increased capital spending needs have been a major concern of investors and have kept cable stock prices relatively low.
While there is an auction of wireless spectrum coming up, Mr. Roberts said there was nothing new to announce about Comcast entering the wireless business, despite analysts’ speculation.
The company also announced a $7 billion increase to its stock repurchase program, reflecting the company’s belief that its shares are undervalued.
Cable ad revenues rose 7 percent to $407 million in the third quarter as the addition of an extra broadcast week offset a decline in political advertising from a year ago.
Comcast’s programming segments reported third-quarter revenue of $330 million, up 27 percent. Operating cash flow rose 11 percent to $97 million. The gains reflect an increase in viewers and higher advertising and distribution revenue. The programming segment consists of networks E! Entertainment, Style Network, the Golf Channel, Versus, G4 and AZN.
Craig Moffett, analyst at Sanford Bernstein, said that while the third-quarter results were broadly in line with expectations, “Individual product metrics were all a touch light.”
Mr. Moffett said weakness in the economy—mainly slower housing growth—was more responsible for Comcast’s slower growth than escalating competition.
“We view Comcast’s third-quarter results as reflective of solid business fundamentals,” Spencer Wang of Bear Stearns said. “However, disappointing RGU [revenue-generating unit] metrics will likely continue to remain a concern for the Street and reinforce current poor cable sentiment. Nonetheless, at current levels, we view risk/reward as attractive in Comcast.”
(Editor: Robbins)