Comcast stock rose Thursday after the cable TV and media firm reported third quarter earnings and revenue that topped Wall Street targets and broadband subscriber losses came in lower than expected. On its earnings call with Wall Street analysts, the company said it may spin off its cable TV programming business.
The company, which owns NBCUniversal, reported Comcast earnings before the market open.
"We are now exploring whether creating a new, well-capitalized company owned by our shareholders and comprised of our strong portfolio of cable networks would position them to take advantage of opportunities in the changing media landscape and create value for our shareholders," said Comcast President Michael Cavanagh on its earnings call with Wall Street analysts.
Comcast Stock: USA Network, Syfy, Bravo
The possible spin-off would not include the Peacock video streaming service or NBCU broadcasting assets, he added.
Comcast's cable programming assets include USA Network, Syfy, Bravo, E!, Universal Kids, Golf Channel, CNBC and MSNBC.
"Spinning cable networks into their own company will make it easier for Comcast to cleave off its TV properties and sell them," said Emarketer analyst Ross Benes, in an email. "Comcast profits are driven by its internet service provider side. Other MVPDs have pulled back their TV ambitions and it would make sense for Comcast to do the same. Dividing the TV networks from the rest of the company will allow Comcast to more clearly show growth in its ISP business. A write down on the TV networks would not be surprising."
Craig Moffett, analyst at MoffettNathanson, expects investors to favor the move.
"Investors have been yearning for a spin off of the whole media business for years," he said in an email. "This is the next best thing."
He added: "But the real story today isn't the possible spin off. It's the evidence that broadband net adds may finally be stabilizing. With the prospect of a cable network spin off, stable broadband net adds, continued growth in wireless, and the opening of Epic Universe, there's a lot to look forward to for 2025."
On an adjusted basis, Comcast earnings rose 3% to $1.12 in the quarter ending Sept. 30. Revenue rose 6.5% to $32.07 billion. Analysts had predicted adjusted profit of $1.06 on revenue of $31.8 billion.
CMCSA Stock: Wireless Subscribers Top Views
Comcast said it lost 365,000 video customers and 87,000 broadband subscribers.
Analysts polled by FactSet had estimated video subscriber losses of 420,000 and broadband subscriber losses of 146,000. With federal subsidies for low income households ending, broadband losses were expected to be higher.
In a bright spot, Comcast said it added 319,000 wireless subscribers. Analysts had estimated wireless subscriber additions of 301,000.
A slowdown in TV ad spending continues to impact NBCU, but the Paris Olympics, election-ad spending and recently released movies boosted Q3 results. In Q3, growth slowed again at NBCU's theme parks but analysts expect a rebound after the opening of Epic
Universe next year.
On the stock market today, Comcast stock jumped 5.4% to 44.52. Shares have a 47.11 buy point from a saucer base. Investors could use 42.77 as an early entry from a handle that's slightly too low to be proper.
Shares in the company had risen only 3% in 2024 heading into the Comcast earnings report.
But Comcast stock had rallied after Verizon Communications, T-Mobile US and AT&T reported Q3 results.
The phone companies have rolled out fixed wireless access (FWA) broadband services.
CMCSA Stock: Broadband Competition
"There's a growing consensus that the worst of FWA is behind us," said Moffett. " Verizon raised their long term FWA target by a smaller increment than had been expected. Both Verizon and T-Mobile are suggesting that the run rate for FWA going forward is flat to slightly slower. Even AT&T, which had barely gotten started with FWA, is indicating that the run rate won't be faster than the modest pace we've seen thus far."
However, the phone companies are ramping up fiber-optic network deployments.
Heading into the Comcast earnings report, Raymond James analyst Frank Louthan said in a report: "We believe the Street remains focused on broadband subscribers as the critical factor for (Comcast) shares, despite other positive developments such as increased dividends and share repurchases."
Meanwhile, Gimmer Credit says Comcast is a cash flow machine, especially with reduced losses at Peacock. It estimated that Comcast will produce roughly $11 billion of free cash flow in 2024 and will repurchase $10 billion of its own stock.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on artificial intelligence, cybersecurity and cloud computing.
