Copyright 2006 TheStreet.com, Inc.
February 2, 2006 Thursday 7:29 AM Eastern Time
By TSC Staff
Comcast (CMCSA:Nasdaq) posted a sharp drop in fourth-quarter earnings, missing Wall Street's estimates, as investment gains dried up. The company duly pledged to spend $5 billion buying back stock.
The Philadelphia-based cable system operator made $133 million, or 6 cents a share, for the quarter ended Dec. 31, down from the year-ago $423 million, or 19 cents a share.
Excluding certain items, earnings were 9 cents a share in the latest quarter and 4 cents a year ago. Analysts surveyed by Thomson First Call were looking for 15 cents.
Revenue rose 9.2% from a year ago to $5.72 billion, matching the Wall Street estimate. Consolidated operating cash flow rose 8.5% from a year ago to $2.2 billion, while operating income rose 26% to $893 million. Free cash flow rose 40% from a year ago to $699 million. But on a combined basis, investment and other income for the fourth quarter declined to $58 million from $553 million in the same quarter of 2004.
The decline was driven by a lower level of unrealized gains in its investment portfolio in the fourth quarter of 2005 and the positive impact of the settlement of certain litigation included in the fourth quarter of 2004.
"Our operational and financial achievements in 2005, which included delivering near double-digit revenue and double-digit operating cash flow growth, were driven by terrific consumer demand for our new products and significant growth in our high-speed and digital businesses," CEO Brian Roberts said. "These results reinforce the value of the investments we have already made in content and technology and demonstrate that our strategy of offering our customers innovative, differentiated products is working."
At Comcast Cable, revenue rose 8.2% from a year ago to $5.4 billion. Video revenue increased 5.7% during the period, driven by higher monthly revenue per basic subscriber and a 13.1% increase in the number of digital customers. Comcast Cable added 342,000 digital cable subscribers and 40,000 basic cable subscribers during the fourth quarter of 2005. Basic subscriber additions were net of an estimated loss of 20,000 subscribers due to the hurricanes.
Comcast Cable added 378,000 high-speed Internet subscribers during the fourth quarter of 2005. Revenues for this service increased 23.9% from the prior year to $1.1 billion, reflecting strong year-over-year subscriber growth and stable average monthly revenue per subscriber.
Cable phone revenue, in the fourth quarter of 2005, was flat at $173 million, which includes the increase in revenue associated with the addition of 134,000 CDV customers during the quarter offset by the loss of 55,000 circuit-switched customers which, as described above, generate higher monthly revenue per customer. Comcast Cable added 79,000 phone subscribers in the fourth quarter of 2005 compared to 10,000 subscribers in the fourth quarter of 2004.
Comcast Cable capital expenditures were $849 million for the fourth quarter of 2005 compared to $1 billion last year. The decline in capital expenditures was due primarily to a $119 million or 72.5% decline in plant upgrade spending in the fourth quarter of 2005.
For the year, cable capital expenditures were flat at $3.6 billion, reflecting increased purchases of digital set-top boxes to meet strong demand for HDTV and DVR digital services, costs associated with readiness and deployment of CDV and the impact of hurricane-related reconstruction costs, offset by declines in plant upgrade spending. The hurricane-related costs included in capital expenditures for 2005 were $25 million.
Upgrade capital in 2005 declined $637 million or 70.7% to $265 million. In 2005, 76.1% of cable capital expenditures were variable and directly associated with new product deployment and consumer demand for its products, as compared to 58.1% in 2004.
For 2006, the company guided to 9%-10% revenue growth, 10%-11% operating cash flow growth in cable, the addition of 3.5 million revenue-generating units and conversion of 25%-30% of operating cash flow into free cash flow.