The Zacks Analyst Blog Highlights: Comcast, Verizon Wireless, AT&T, DIRECTV and DISH Network

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Nov 03, 2011, 09:30 ET

CHICAGO, Nov. 3, 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), DIRECTV (Nasdaq: DTV) and DISH Network Corp. (Nasdaq: DISH)

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Here are highlights from Wednesday's Analyst Blog:

Comcast Misses Zacks Estimates

Comcast Corp. (Nasdaq: CMCSA) underperforms in the third quarter of 2011. Nevertheless, there is a silver lining in its third quarter report. Although the company continues to suffer huge video subscriber loss, it has actually declined by a whopping 40% year over year.

EPS

GAAP net income for the third quarter of 2011 was $908 million or 33 cents per share compared with a net income of $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.

Revenue

The third-quarter 2011 total revenue came in at $14,339 million, up 51.1% year over year, surpassing the Zacks Consensus Estimate of $14,220 million. Both Cable Communications and NBC Universal segments generated solid revenue growth.

Margin

Quarterly operating costs and expenses were $9,765 million, up 65.2% year over year. However, quarterly operating income was $2,641 million, up 35.2% year over year. Operating margin, in the third quarter of 2011, was 18.4% compared with 20.6% in the prior-year quarter.

Share Repurchase and Dividend

During the third quarter of 2011, Comcast repurchased 27.5 million of its common share for $600million. In the reported quarter, the company paid dividends totaling $309 million.

Cash Flow

During the third quarter of 2011, Comcast generated $4,574 million of cash from operations compared with $3,578 million in the prior-year quarter. Consolidated free cash flow in the reported quarter was $1,392 million compared with $1,025 million in the year-ago quarter.

Balance Sheet

Cash and cash equivalents at the end of the third quarter of 2011 were $1, 806 million compared with $5,984 million at the end of fiscal 2010. Total debt at the end of the reported quarter was approximately $40,970 million compared with $29,615 million at the end of fiscal 2010. At the end of the third quarter of 2011, debt-to-capitalization ratio was 0.45 compared with 0.40 at the end of fiscal 2010.

Cable Communications Segment

Quarterly pro forma revenue was $9,331 million, up 5% year over year. Pro forma operating cash flow was $3,714 million, up 6.7% year over year. Within this segment, Video revenue was $4,892 million, up 1.1% year over year. High-Speed Internet revenue was $2,205 million, up 9.8% year over year. Voice revenue was $883 million, up 6.3% year over year.

Advertising revenue was $492 million, down 4% year over year. Business Services revenue was $464 million, up 39.4% year over year. Other revenue was $395 million, up 8.6% year over year.

As of September 30, 2011, Comcast had 17.811 million (up 6.7% year over year) High-Speed Internet customers; 9.196 million (up 10.1% year over year) Voice customers; and 22.360 million (down 2.5% year over year) Video customers.

NBC Universal Segment

Quarterly pro forma revenue was $5,200 million, up 4.6% year over year. The segment's pro forma operating cash flow was $951 million, down 9.3% year over year. Within this segment, Cable Networks revenue was $2,097 million, up 12% year over year. Broadcast TV revenue was $1,511 million, up 2.9% year over year. Filmed Entertainment revenue was $1,096 million, down 7.8% year over year. Theme Parks revenue was $580 million, up 9.1% year over year.

Our Take

Comcast became the largest integrated content development and distribution company of the U.S. after completing the acquisition of NBC Universal. We also remain quite 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.

Satellite TV operators, such as DIRECTV (Nasdaq: DTV) and DISH Network Corp. (Nasdaq: DISH), are also gaining momentum with innovative services. We maintain our long-term Neutral recommendation on Comcast. Currently, it holds a Zacks #3 Rank (Hold) on the stock.

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