Zacks Analyst Blog Highlights: Comcast, Verizon Wireless, AT&T, Netflix and Deere & Co

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Feb 17, 2011, 09:30 ET

CHICAGO, Feb. 17, 2011 /PRNewswire/ -- Zacks.com Analyst Blog features: Comcast Corp. (Nasdaq: CMCSA), Verizon Wireless (NYSE: VZ), AT&T (NYSE: T), Netflix Inc. (Nasdaq: NFLX) and Deere & Co. (NYSE: DE).

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Here are highlights from Wednesday's Analyst Blog:

Comcast Beats, Dividend Raised

Comcast Corp. (Nasdaq: CMCSA) reported excellent fourth quarter 2010 financial results, which surpassed the Zacks Consensus Estimate. In a significant drive to raise its shareholders' wealth, the board of directors has raised the annualized dividend rate by 19% to 45 cents per share.

Additionally, the board of Comcast declared its intention to speed up the share buy-back program and may repurchase the remaining $2.1 billion share under the existing authorization by the end of 2011. This will be an increase of 75% year over year.

Earnings per share (EPS)

GAAP net income for the fourth quarter 2010 was $1,018 million or 36 cents per share compared with $955 million or 33 cents per share reported in the prior-year quarter. Adjusted EPS in the reported quarter was 35 cents, which was well above the Zacks Consensus Estimate of 32 cents.

Better-than-expected results were due to a solid customer growth, an improving advertising market and continued strength in Business Services.

Revenue

In the fourth quarter of 2010, total revenue was $9,721 million, up 7.2% year over year. This was also better than the Zacks Consensus Estimate of $9,555 million. During the quarter, all the three segments witnessed revenue growth. Advertising revenues flourished in the reported quarter, reflecting 29% year-over-year growth.

Margins

Operating margin was 20.7% compared with 20.0% in the prior-year quarter. Operating Income increased approximately 10.8% year over year to $2,013million, attributable to solid operating results in the Cable and Programming segments.

Share Repurchase and Dividend

During the fourth quarter, Comcast repurchased 15.9 million of its common shares for $300million. In fiscal 2010, Comcast also paid cash dividends totaling $1.1 billion.

Balance Sheet and Cash Flow

Cash and marketable securities, at the end of the fiscal 2010, was $5,984 million compared with $671 million at the end of fiscal 2009. Total debt, at the end of the fiscal 2010, was approximately $29,615 million compared with $27,940 million at the end of fiscal 2009.

Excluding the impact of Economic Stimulus Packages, free cash flow during the fourth quarter was $1,121 million compared with $768 million during the prior-year quarter. At the end of fiscal 2010, debt-to-capitalization ratio was 0.40 compared with 0.39 at the end of fiscal 2009.

During the reported quarter, Comcast generated $11,179 million of cash from operations versus $10,281 million in the year-ago quarter. Capital expenditure in the fourth quarter was nearly $1.5 billion, down 4.8% year over year.

Cable Segment

Revenues from the Cable segment were $9,155 million, up 6.9% year over year. Operating cash flow from this segment was $3,775 million, up 8.7% year over year. This upside was mainly driven by growth across Video, High-Speed Internet and Voice residential services.

At the end of fiscal 2010, Comcast had 16.988 million (up 6.6% year over year) High-Speed Internet customers; 8.610 million (up 12.9% year over year) Voice customers; 22.802 million (down 3.2% year over year) Video customers and 19.740 million (up 7.2% year over year) Digital Video customers.

Programming Segment

Revenues from the Programming segment were $419 million, up 13.6% year over year. This was mainly due to higher affiliate and advertising revenues. Operating cash flow from this segment was approximately $46 million, up 1.6% year over year.

Corporate & Other Segment

Revenues from the Corporate & Other segment were $147 million, up 10.5% year over year. Operating cash flow from this segment was a loss of $105 million in the quarter compared with a loss of $108 million in the year-ago quarter.

Our Take

The company has become the largest integrated content development and distribution company of the U.S. after completing the acquisition of NBC Universal. We also remain very optimistic about the company's diversification, network upgrade and innovative product offering strategies. In the last one year, the company posted strong revenues and robust free cash flow.

However, Comcast faces 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. Recent growth of online video streaming companies such as Netflix Inc. (Nasdaq: NFLX) and Hulu have become major threats to the company.

We maintain our long-term Neutral recommendation on Comcast. Currently, it has a Zacks#3 Rank, implying a short-term Hold rating on the stock.

Deere Outperforms Zacks Estimates

Deere & Co. (NYSE: DE) delivered earnings of $1.20 per share in its first quarter ended January 31, 2011, striding ahead of the Zacks Consensus Estimate of $1.00 and more than double of 57 cents earned in the year-ago quarter. Net income was more than double from $243.2 million in first quarter of 2010.

The outperformance was largely driven by strong demand for farm machinery coupled with improved conditions in construction and forestry markets.

Revenue

Deere's worldwide total sales increased 27% year over year to $6.1 billion, beating the Zacks Consensus Estimate of $5.9 billion handily. Net sales of equipment operations (which comprise Agriculture and Turf, Construction and Forestry) were $5.5 billion, a 30% year-over-year increase including an unfavorable currency translation effect of 1% and a price increase of 2%.

On a geographic basis, equipment net sales were up 35% in the United States and Canada and 22% in rest of the world.

Segment performance

In terms of sales growth, Construction & Forestry fared better with a year-over-year sales growth of 81% to reach $1.1 billion ascribed to higher shipment and production volumes. The segment operating profit of $88 million reversed the loss of $37 million reported in the prior-year period.

The Agriculture & Turf segment followed with sales increasing 21% to $4.4 billion, led by higher shipment volumes and improved price realization. Operating profit at the segment was $558 million, up 59% year over year. The increase in operating profit resulted from higher shipment and production volumes and improved price realization, partially offset by higher incentive-compensation expenses and higher raw material costs.

Net revenues at Deere's Financial Services operations were $507 million in the quarter, almost flat with the prior year quarter. Net income in the segment was $118 million, up 39% from the year-ago quarter. The improvement was largely driven by portfolio growth and a lower provision for credit losses.

Financial Position

As of January 31, 2011, Deere had cash and cash equivalents of $3.44 billion, down from $5.04 billion as of January 31, 2010. Long term borrowings declined to $16.7 billion from $17.1 billion as of January 31, 2010.

Net cash used in operating activities in the quarter was $900.3 million compared with $318.3 million used in the year-ago period.

Looking Forward

Deere expects equipment sales to grow 25% in the second quarter and in the range of 18% to 20% for fiscal 2011. Guidance includes a favorable currency-translation impact of 2% for both second quarter and fiscal year.

Net income is estimated to be $2.5 billion in 2011.

Segment wise, Deere expects worldwide sales of Agriculture and Turf equipment to grow by 16% for full-year 2011, benefiting from favorable global farm conditions. Construction and Forestry equipment are expected to improve 35% for 2011.

Net income from Financial Services is estimated to be $400 million, reflecting continued growth in the portfolio.

Region wise, Deere expects industry farm-machinery sales in the U.S. and Canada to grow 5% for 2011. Western and Central Europe is expected to increase 10%, while sales in the Commonwealth of Independent States are expected to see moderate gains. In South America, the company expects industry sales to be comparable with the strong levels of 2010.

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