Why Comcast Missed Second-Quarter Revenue Expectations



Comcast’s Q2 results

Cable and media giant Comcast (CMCSA) delivered mixed quarterly results on July 26 before the opening bell. The company exceeded Wall Street expectations for earnings but missed revenue estimates. Comcast stock increased nearly 2% in pre-market trading following the news.

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Comcast’s earnings and revenues

Comcast reported adjusted earnings of $0.65 per share in the second quarter, topping analysts’ expectations of $0.60 per share by 8.3%. Earnings on an adjusted basis were also 25% higher than Q2 2017 earnings.

The consistent growth in Comcast’s earnings is the result of the company’s continued focus on its Cable segment’s high-speed Internet, as the broadband market is expanding, and more and more consumers are looking for high-speed data. Though the filmed entertainment business is not doing very well, the NBCUniversal segment has been performing well driven by theme parks and cable network businesses.

The US pay-TV company, however, missed revenue expectations in the quarter. Total revenues of $21.7 billion increased 2.1% on a year-over-year (or YoY) basis but lagged Wall Street estimates of $21.9 by 0.6%. In the quarter, Comcast continued to face a decline in the number of residential video customers, as a large number of customers are shifting from traditional video services to streaming services provided by digital rivals like Netflix (NFLX) and Amazon (AMZN). In the second quarter, Comcast lost 136,000 residential video customers compared to 45,000 customer losses in the year-ago quarter.

Comcast’s plans to buy Sky

Comcast has recently withdrawn its bid to acquire most of the media and entertainment assets of Twenty-First Century Fox (FOXA) and has plans to focus on buying a 61% stake in London-based broadcaster Sky. Comcast’s decision to move away from the Fox deal has paved the way for Walt Disney (DIS) to go ahead with its acquisition of Fox assets for $71.3 billion.

Both Fox and Comcast have bid on the remaining 61% stake in European broadcaster Sky assets and have recently raised their stakes, as the companies are looking to expand their portfolios with premium media assets. Sky assets are essential for Comcast, as it seeks to expand its empire internationally and build its portfolio with more content and other premium media assets to compete with digital rivals.


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