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What’s behind Comcast’s Disappointing Revenues in Q1 2019?

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Comcast misses revenue estimates

Comcast (CMCSA) posted revenues of $26.9 billion in Q1 2019, missing the consensus estimate of $27.2 billion by 1.1%. However, the top line grew ~18% YoY driven by growth in its Cable Communications segment, offset by a decline in NBCUniversal and Sky businesses. While cable communications’ revenues improved 4.2%, NBCUniversal and Sky revenues declined by 12.5% and 5% YoY in Q1 2019.

Revenues drivers

In Q1 2019, the cable communications business revenues increased 4.2% YoY on the back of growth in high-speed Internet, business services, wireless, and other revenues. However, advertising revenue declined year-over-year in the quarter. Video and voice revenues also declined in the first quarter due to a decline in residential customers.

Revenue at NBCUniversal declined 12.5% YoY in the quarter. Except for filmed entertainment, revenues of the broadcast TV, cable networks, as well as theme parks divisions plummeted in Q1 2019. Excluding the impact of the PyeongChang Olympics and the NFL’s Super Bowl LII in the first quarter of 2018, cable networks, and broadcast divisions reported revenue growth on a YoY basis.

Revenue at Sky stands at $4.8 billion in the first quarter, which declined 5% YoY in Q1 2019 due to currency headwinds. Sky revenues increased 1.9% on a constant currency basis driven by higher content and advertising revenue, offset by lower direct-to-consumer revenues.

Comcast acquired Sky in October 2018 to expand globally and to compete with digital rivals like Netflix (NFLX), Amazon (AMZN), and others, which are attracting traditional cable subscribers with lower video entertainment prices. Sky’s video-streaming business, Now TV, helps Comcast compete with Netflix across the globe.

Comcast is also planning to launch its streaming service in early 2020 at ~$12 per month for users who do not have a cable subscription. Telecom and media rivals like Walt Disney (DIS) and AT&T’s (T) WarnerMedia are also launching their streaming services in late 2019. Apple’s video streaming service is also expected in the fall. Disney’s cost would be $6.99, lower than Netflix’s $8.99 per month for a basic plan.

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