By more than one measure, sentiment has grown less bullish despite the S&P at all time highs. Ro...
Comcast & Disney: Cable, Media, Movies and Streaming
03/11/2019 5:00 am EST
Comcast reported good Q4 results. Including Sky in both periods, revenue grew over 5% and adjusted EBITDA advanced 11%. EPS grew 36% after eliminating a large income tax benefit in the year ago period.
A focus on its connectivity services has benefitted Comcast’s cable segment, which continues to build overall customer relationships despite a reduction in video subscribers. Total customer relationships grew 258k to 30.3 million despite losing 29k net video customers.
Customer relationship additions were driven by 351k new high-speed internet customers, bringing internet net adds to more than 1.3 million for the year. Combined, better margin high-speed internet and business services revenue grew approximately 10%. Management expects this momentum in its higher-margin offerings to continue in 2019.
The NBCUniversal segment grew revenue 7% helped by growth in its cable networks and filmed entertainment divisions. In its first quarter, Sky reported over 5% revenue growth on a constant currency basis as adjusted EBITDA advanced 12%.
Unsurprisingly, Comcast indicated it is pleased with the Sky acquisition, but beyond highlighting that Sky is under-penetrated in its markets, management remains coy about its specific plans. Management expressed “continued confidence” in its announced $500 million synergy target.
At the end of Q4 Comcast’s net leverage was 3.3x, and it has indicated it will stop its share repurchase program in 2019 as it pays down the debt associated with the Sky acquisition. Management expects it will return to its historical leverage of approximately 2.0x within 18- 24 months. CMCSA is a buy up to $43.
All eyes remain on Disney’s launch of its Disney+ direct-to-consumer offering later this year. Q1 results were better than expected but still held back by investments required to launch the new service and difficult comparisons within its Studio segment. Revenue was flat versus a year ago and EPS declined 3%.
This is the first quarter for the company announcing results under its new business segments, which include the Direct-to-Consumer & International segment that will house the Disney+ results.
This segment reported a loss of $136 million in the quarter. Studio Entertainment reported a revenue decline of 27% due to modest results from Mary Poppins Returns versus a stronger slate last year when Disney released Star Wars: The Last Jedi and Thor: Ragnarok. Results within the Media Networks and Parks, Experiences, & Consumer Products segments were solid.
The launch of Disney+ will require near-term sacrifices in exchange for what the company expects will be long-term gain. For the year, Disney indicated it would see a decrease in $150 million in operating income as it stops licensing content to the likes of Netflix (NFLX) in order to make content available exclusively on its own service.
As a positive sign for the future of Disney+, the company indicated its ESPN+ service, which launched last April, has doubled subscribers over the past five months and now has two million subscribers. DIS is a buy up to $126.
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