The Zacks Analyst Blog Highlights: Comcast, Verizon, AT&T, Netflix and Tyson Foods

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Aug 16, 2011, 09:30 ET

CHICAGO, Aug. 16, 2011 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Comcast Corp. (Nasdaq: CMCSA), Verizon Wireless (NYSE: VZ) AT&T (NYSE: T) Netflix Inc. (Nasdaq: NFLX) and Tyson Foods Inc. (NYSE: TSN).

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Here are highlights from Monday's Analyst Blog:

Earnings Scorecard: Comcast

Comcast Corp. (Nasdaq: CMCSA) reported blockbuster second quarter 2011 financial results, which exceeded the Zacks Consensus Estimate. This fabulous performance was attributable to higher broadband subscribers' addition and increased contribution from NBC Universal, where Comcast holds a controlling stake since January 2011. The company witnessed a 10.2% year over year decline in video subscriber customers.

Second Quarter Highlights

Total revenue in the reported quarter came in at $14,333 million, up 50.5% year over year and ahead of the Zacks Consensus Estimate of $13,773 million. The year-over-year upside in revenue was primarily driven by higher Cable Communications and advertising revenue.

GAAP net income in the second quarter of 2011 was $1,022 million or 37 cents per share compared with a net income of $884 million or 31 cents per share in the prior-year quarter. Adjusted (excluding special items) EPS in the reported quarter was 42 cents, which beat the Zacks Consensus Estimate by a penny.

Operating margin in the second quarter of 2011 was 20.5% compared with 21.8% in the prior-year quarter. During the second quarter of 2011, Comcast repurchased 22.6 million shares for $525million. In the reported quarter, Comcast paid dividends totaling $311 million.

Agreements of Analysts

For the third and fourth quarter of 2011, of the 19 analysts covering the stock in the last 7 days, none revised their estimates. Similarly, for fiscal 2011, out of the 17 analysts, none increased or decreased their estimates. Likewise, for fiscal 2012, out of the 20 analysts none revised their estimates.

Most of the analysts prefer to remain on the sidelines due to poor economic growth in the U.S. coupled with huge video subscriber losses.

Currently, the Zacks Consensus EPS Estimate for the third quarter of 2011 is pegged at 40 cents per share. The projected annual growth rate is 24.01%. Similarly, for the fourth quarter, the current Zacks Consensus EPS Estimate of 44 cents per share indicates a gain of 29.01% year over year.

Magnitude of Estimate Revisions

During the last 7 days, for the third and fourth quarter of 2011, the current Zacks Consensus Estimates remain unchanged at 40 and 44 cents, respectively. However, for fiscal 2011, the Zacks Consensus Estimate is a penny below the current estimate of $1.60, while for fiscal 2012; the Zacks Consensus Estimate is in line with the current estimate.

Earnings Surprises

With respect to earnings surprises, the company's consistent track record in the last four quarters is expected to persist in the upcoming quarters. Comcast produced an earnings surprise of 1 cent or 2.44% in the last quarter. The ongoing quarter and the next quarter reflect an upside potential (essentially a proxy for future earning surprises) of 0.00% and 4.55%, respectively, while fiscal 2011 and 2012 contains 2.52% and 2.12% upside potential, respectively.

Our Recommendation

Comcast has become the largest integrated content development and distribution company in the U.S. after completing the acquisition of NBC Universal. We also remain optimistic regarding the company's diversification, network upgrade and innovative product offering strategies. Comcast continues to post strong growth in revenue and free cash flow.

However, Comcast is facing severe competition from both telecom and satellite service providers that started offering subscription TV services at a low price. Verizon Wireless (NYSE: VZ) with FiOS network and AT&T (NYSE: T) with U-Verse network are likely to make the market highly competitive. Growth of online video streaming companies, such as Netflix Inc. (Nasdaq: NFLX) and Hulu have become major threats for the company.

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.

Chicken Feed Getting Expensive

Meat producers like Tyson Foods Inc. (NYSE: TSN) will find feeding their stocks with corn to be dearer as corn, soybean and wheat prices surged following the U.S. government's announcement that the farmers may not meet the expectation offered by it due to the damaging heat wave across the nation.

The U.S. Department of Agriculture yesterday lowered its corn-crop estimate by 4.1 %, and also reduced the soybean forecast by 5.2%, along with spring-wheat production, which will be down by 5.2 % from its earlier prediction in July.

Analysts fear that this may lead to grain-based inflation, as it is the primary input of many food sectors including meat and dairy. Corn, wheat and soybean- meal are the main ingredients in feeds of cattle, hogs and poultry.

Spring flooding, which resulted in late planting followed by a hot summer, proved very harmful for the grain crops. The USDA reduced its planted acreage estimate from its June 30 2011 planting report, cutting 500,000 acres from Montana and 450,000 from North Dakota.

The revision was made after farmers in four northern states were resurveyed in July, as many had not finished sowing when the government collected data for its earlier report.

Tyson Foods reported its third-quarter 2011 adjusted earnings of 56 cents a share, surpassing the Zacks Consensus Estimate of 40 cents. Profits were driven by higher sales as well as strong performance in all the segments, particularly Beef and Pork

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