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AT&T and Comcast: Media Buys

09/14/2016 7:00 am EST


John Buckingham

Editor, The Prudent Speculator

John Buckingham is long known as one of the investment industry's leading value investors; here, the editor of The Prudent Speculator looks to a pair of leading players in the telecom space.

Telecom behemoth AT&T (T) provides telephone, TV, Internet and wireless service across the country. It maintains a high-speed LTE network for mobile devices that covers 335 million people.

The firm's broadband service has 60 million customer locations with plans to roll out fiber service to 14 million business locations over the next four years.

With its acquisition of DirecTV complete, AT&T has added more than 1 million satellite subscribers and management reports that the cost synergies are ahead of plan.

Now, halfway through the year, T expects double-digit revenue growth and adjusted earnings per share growth in the mid-single-digit range or better for 2016 (currently +7% year to date).

Broadband subscriptions continue to climb and in the U.S. Mobile segment, AT&T has reported a record EBITDA margin of 41.4% thanks to the shift towards customers paying the full price of phone upgrades, versus subsidies.

In addition to its strategic spending for parts of the wireless spectrum and content, we like that T continues to distribute cash to holders, with the yield on the low-beta stock at 4.7%.

Comcast (CMCSA) is a global media and technology company with two primary businesses, Comcast Cable and NBCUniversal.

The former is one of the nation’s largest video, high-speed Internet and phone providers to residential customers under the XFINITY brand and also provides these services to businesses.

The latter operates news, entertainment and sports cable networks, the NBC and Telemundo broadcast networks, television production operations, television station groups, Universal Pictures and Universal Parks and Resorts.

The second quarter saw CMCSA earn $0.83 per share ($0.81 est.) and announce the $3.8 billion acquisition of DreamWorks Animation.

Regulatory hurdles still must be overcome, but we are constructive on DreamWorks, while we like that CMCSA is expanding its already-diversified income stream and augmenting its ample opportunities for organic growth.

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By John Buckingham, Editor of The Prudent Speculator

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