Comcast Corp, the nation's largest cable operator, on Thursday reported a better-than-expected rise in quarterly profit on record subscriber growth, sparking a jump in cable shares.
Comcast, which reaffirmed its full-year outlook, said its bottom line was also helped by one-time gains from its July purchase of cable systems from bankrupt cable operator Adelphia Communications Corp and system swaps with Time Warner Inc.
Without the gains, income was $548 million, or 26 cents a share, beating the average analyst target of 19 cents, according to Reuters Estimates.
Like other cable operators, Comcast has been winning customers by offering cable television, phone and Internet services in one package, at a lower price than if they were bought separately from Internet, phone or satellite TV companies.
Even as competitors AT&T Inc and Verizon Communications Inc have started their own TV offerings to compete with cable, Comcast reported record growth in digital video, phone and Internet subscribers. "I see a lot of opportunities for Comcast and all the other (cable) operators to continue strong growth in revenue and cash flow," said Robert Routh analyst at Jefferies & Co.
Third-quarter net profit rose to $1.22 billion, or 58 cents per share, after the tax gains, from $222 million, or 10 cents per share, a year earlier.
Revenue jumped 22 percent to $6.43 billion, but missed the Reuters Estimates consensus target of $6.49 billion.
Comcast Chief Executive Brian Roberts said he expected another record quarter of growth in the current period. "We believe that this quarter will be as good or we hope even better," Roberts said on a call with analysts.
The results helped lift other cable stocks, with Time Warner rising nearly 1 percent to $19.99, Cablevision rising 0.4 percent to $27.7, Charter Communications gaining 12 percent to close at $2.12, and Mediacom adding 5.5 percent to $8.20.
"I think investors are finally coming round to recognising the power of cable's triple play offer," Craig Moffett analyst at Bernstein Research said. "Expectations are being set to more appropriately high levels."
Comcast signed up 558,000 digital video subscribers in the quarter, pushing its penetration in that business past the 50 percent mark for the first time.
It added a net 381,000 phone customers, 536,000 Internet subscribers, and 10,000 basic video subscribers.
Analyst Todd Mitchell of Kaufman Bros. expected Comcast to add 400,000 in digital video, 400,000 in Internet, 345,000 phone customers, and 20,000 basic video subscribers.
Comcast, with 24.1 million cable customers, reaffirmed its 2006 outlook, updated to include the Adelphia/Time Warner deal which closed on July 31.
Cable revenue growth will be 10 percent to 11 percent above 2005 pro-forma revenue of $23.6 billion.
It also said net additions of subscribers who take new cable services will rise by 60 percent over the previous year's pro-forma figure of 3 million. "Our expectation is that they will beat their reaffirmed outlook for the year," UBS analyst Aryeh Bourkoff said.
Under the July deal, Comcast increased its market share in Florida, New England, Minneapolis and its home base of Pennsylvania.
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