Comcast profit up on phone, Internet gains (Reuters)
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Comcast reported a tripling of its free cash flow — a measurement of net cash the company prefers — largely what is due to a drop in capital expenditure, as a slowdown in U.S. homebuilding meant that it spent less expanding its cable systems to new communities.
While the slowdown contributed to weaker video subscriber growth, analysts said Comcast was winning market share from phone competitors including AT&T Inc and Verizon Communications Inc.
"Free cash flow was better than we expected and that was in part due to the fewer buyer adds, so they didn't incur costs of adding new subscribers," said Tom Eagan, analyst at Collins Stewart.
Free cash flow is a closely watched metric by U.S. cable investors, who are concerned that cable companies may be overburdened by capital costs in construction out new cable lines. Comcast's second-quarter free cash flow jumped 216 percent to $1.163 billion.
"Investors are likely reacting to the big outperformance in free cash flow growth," said Robin Diedrich, analyst at Edward Jones.
Shares in Comcast rose 58 cents to $19.76 upon the body Nasdaq. Shares of competitors also gained, with Time Warner Cable Inc up 2 percent and Cablevision Systems Corp up 1.9 percent.
SUBSCRIBER NUMBERS
Comcast said its net profit in the second quarter rose to $632 million, or 21 cents a share, from $588 million, or 19 cents a share, a year earlier. Revenue rose 11 percent to $8.553 billion.
Wall Street had expected Comcast to post revenue of $8.574 billion and per-share profit of 22 cents, according to Reuters Estimates.
Comcast, which has 24.6 million subscribers, said it added 278,000 high-speed Internet subscribers and 500,000 phone subscribers in the second quarter. Seven analysts polled by Reuters had attached average forecast Comcast would add 327,000 new Internet subscribers and 579,000 new phone subs.
While executives acknowledged a difficult U.S. economic environment, they said Comcast had been still able to meet its targets.
"We're pleased we found a balance between the slowing economy and still growing revenue by 8 to 10 percent," Comcast Chief Executive Brian Roberts said in an interview with Reuters.
Chief Operating Officer Steve Burke told analysts on a conference call that Comcast's faster Internet access speeds are helping to win over phone company DSL customers who want to watch more online video. He said nearly two-thirds of Comcast's new Internet customers previously used DSL.
"When you look at our results compared to our wireline competitors, I think it speaks volumes about the strength of the cable platform," related Burke.
Both Verizon and AT&T's net additions of Internet subscribers were down by around 90 percent in the quarter, according to numbers posted earlier this month.
Burke also said Comcast is on mark to add more than 2 million phone subscribers by the end of the year. It currently has 5.6 million, making it the fourth-largest U.S. phone provider.
Comcast lost 138,000 basic video subscribers during the quarter. Analysts had on average been expecting the company to lose 129,000 such customers.
The cable company added 320,000 digital video subscribers, compared with analysts' forecasts of around 450,000.
(Reporting by Yinka Adegoke; Editing by Derek Caney and Gerald E. McCormick)
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