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Telecommunications and media company Comcast (NASDAQ:CMCSA) fell short of analysts' expectations in Q2 CY2024, with revenue down 2.7% year on year to $29.69 billion. It made a non-GAAP profit of $1.21 per share, improving from its profit of $1.02 per share in the same quarter last year.
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Comcast (CMCSA) Q2 CY2024 Highlights:
- Revenue: $29.69 billion vs analyst estimates of $30.04 billion (1.2% miss)
- Adj EBITDA: $10.17 billion vs analyst estimates of $10.07 billion (1.0% beat)
- EPS (non-GAAP): $1.21 vs analyst estimates of $1.12 (8% beat)
- Gross Margin (GAAP): 73.2%, up from 71% in the same quarter last year
- Free Cash Flow of $1.34 billion, down 70.5% from the previous quarter
- Domestic Broadband Customers: 32.07 million, in line with the same quarter last year
- Market Capitalization: $155.1 billion
Cable and SatelliteThe massive physical footprints of fiber in the ground or satellites in space make it challenging for companies in this industry to adjust to shifting consumer habits. Over the last decade-plus, consumers have ‘cut the cord’ to their traditional cable subscriptions in favor of streaming options. While that is a headwind, this affinity to streaming means more households need high-speed internet, and companies that successfully serve customers can enjoy high retention rates and pricing power since the options for internet connectivity in any geography is usually limited.
Sales GrowthA company's long-term performance is an indicator of its overall business quality. While any business can experience short-term success, top-performing ones enjoy sustained growth for multiple years. Regrettably, Comcast's sales grew at a weak 2.2% compounded annual growth rate over the last five years. This shows it failed to expand in any major way and is a rough starting point for our analysis.
Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. Comcast's recent history shows its demand slowed as its revenue was flat over the last two years.
We can dig further into the company's revenue dynamics by analyzing its number of domestic broadband customers and domestic video customers, which clocked in at 32.07 million and 13.2 million in the latest quarter. Over the last two years, Comcast's domestic broadband customers were flat while its domestic video customers averaged 12% year-on-year declines.
This quarter, Comcast missed Wall Street's estimates and reported a rather uninspiring 2.7% year-on-year revenue decline, generating $29.69 billion of revenue. Looking ahead, Wall Street expects sales to grow 2.1% over the next 12 months, an acceleration from this quarter.
Cash Is KingRead MoreAlthough earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can't use accounting profits to pay the bills. Comcast has shown mediocre cash profitability over the last two years, putting it in a pinch as it gave the company limited opportunities to reinvest, pay down debt, or return capital to shareholders. Its free cash flow margin averaged 9.7%, subpar for a consumer discretionary business.
Comcast's free cash flow clocked in at $1.34 billion in Q2, equivalent to a 4.5% margin. The company's margin regressed as it was 6.7 percentage points lower than in the same quarter last year, but we wouldn't put too much weight on it because working capital and capital expenditure needs can be seasonal, causing quarter-to-quarter swings. Long-term trends trump short-term fluctuations.
Over the next year, analysts predict Comcast's cash profitability will improve. Their consensus estimates imply its free cash flow margin of 9.6% for the last 12 months will increase to 12%, giving it more money to invest.
Key Takeaways from Comcast's Q2 Results It was good to see Comcast beat analysts' adjusted EBITDA and EPS expectations this quarter. On the other hand, its revenue unfortunately missed with a roughly in line broadband customer count. Overall, this was a fine quarter for Comcast with not too many surprises. The stock traded up 1.2% to $40 immediately following the results.
