Here are some numbers to consider. Revenue increased just under 9%. Adjusted EBITDA went up over 10%. Adjusted earnings per share increased 26%. Cash from operations was roughly $5.6 billion this quarter versus $5.4 billion in the period one year ago. Customer relationships and product distribution were also good.
What we have here is basically a lesser version of Disney (NYSE:DIS), in a sense. I qualify the comparison because Disney is Disney; that media concern is in a class all by itself in terms of brand equity and consumer response.
Keep in mind, one does not have to have Lucasfilm/Marvel/Pixar to succeed in today's marketplace. There is a significant amount of demand by consumers for stories, and quality storytelling assets are thriving in today's golden age of content.
Comcast has some quality assets. Yes, the company is not entirely popular in terms of customer service (that could be getting better, though, in my opinion), but it has popular offerings. In fact, from the earnings report, we see that NBCUniversal did well in Q1.
The top line for NBCUniversal increased well over 14% to $7.9 billion. Adjusted EBITDA rocketed over 24% to $2 billion. The press release stated that increases at this division's major sections - filmed entertainment, cable networks, broadcast television and theme parks - all helped to drive these results. I think what we can infer from Comcast and its overall model is an advantage to owning platform and content - it tends to help when promoting items like movies and television shows.
As an example, Comcast's on-demand menu is constantly running pitches for the company's movies and products (not all the time, of course, and the company is smart enough to know that it must promote content from competitors as well). That's effective. The company also benefits from all the data it has on its subscribers.
The studio asset must be highlighted because of its recent successes. From the release we note that films such as Split, Get Out, and Fifty Shades Darker helped to drive value. Licensing revenue also increased thanks to the DreamWorks Animation purchase (which was a great move on the part of management; Disney should have tried to take that one off the market before Comcast did, but the cable giant won out. DreamWorks Animation should prove to be a very useful competitive asset in the future).
Obviously, a strong slate cannot be counted on all the time, but I think Comcast, like Disney, is getting smarter about knowing what to program in theaters. I am confident there will be many future blockbusters coming from NBCUniversal. As an example, it was announced that a sequel to Split is in the works. Split was a huge, profitable hit; the movie reportedly cost $9 million to make and it grossed roughly $275 million worldwide, according to Box Office Mojo.
How much Universal profited from the film is difficult to discern, since M. Night Shyamalan (the writer/director of the project) reportedly self-financed the budget, according to Variety (also, Blumhouse Productions was involved with the movie, which adds further complexity to the deal).
The marketing costs (which I have to assume were financed by Universal) are unknown, as far as I can tell; there are international costs as well as domestic costs to releasing a film. Nevertheless, Split certainly helped Universal, and I believe the sequel will do well. Execs at Comcast are hopefully becoming addicted to setting up cinematic franchises, not dissimilar to the addiction Disney CEO Bob Iger must certainly possess.
As can be easily seen, Comcast is in great corporate shape. Shareholders can continue holding this one for the long term. Still, what are the risks? Keep an eye on the cord-cutting story, for one thing. Although that issue seems to go back and forth depending on what article you read, I do think it is a concern.
However, it also is something Comcast management is aware of and which the company can respond to with different product offerings. Another risk is the cost of content. Will Comcast spend so much money on content that a couple of failures will drag down the stock? Always possible. But for now, the story with Comcast is one I believe in.
Disclosure: I am/we are long CMCSA, DIS.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.