Street likes Comcast's plan
EmptyShares of Comcast gained Thursday after the largest U.S. cable operator unveiled a much-requested quarterly dividend and said it's modifying product offerings to retain subscribers amid a sluggish economy and tough competition.
Chairman and CEO Brian Roberts said the company would not bid for Yahoo and Sprint as some have speculated, but "remain disciplined" and focused.
Comcast Class A shares closed up 8.4% on Thursday at $19.08.
For 2008, Comcast provided no guidance on subscriber growth, but management said that the firm likely would continue to lose basic cable users.
Comcast did project more than 20% free-cash-flow gains and at least 8%-10% revenue and operating-cash-flow growth, below its recent double-digit percentage growth levels.
Roberts lauded his firm's latest results, highlighting that they were reached "despite a weak economy and intensified competition in the second half of the year."
"For 2008, we are confident about our competitive position and our ability to further grow our business," he added.
To show its confidence in a continued solid outlook, the Comcast board approved a quarterly dividend that will add up to 25 cents per share annually and is expected to increase over time. In addition, it said Comcast will fully utilize a remaining $6.9 billion share-repurchase authorization by the end of 2009.
The dividend makes for a 1.4% yield, below analysts' hopes, but a good start, according to many who have been pushing the company to return value to shareholders directly amid a weak stock run during the past year.
Comcast on Thursday reported a fourth-quarter profit of $602 million, up from $390 million, or $459 million when adjusted for special items, in the year-ago period. Revenue rose 14% to $8 billion as operating cash flow jumped 19% to $3.1 billion.
In the fourth quarter, Comcast lost 94,000 basic cable subscribers, but added 523,00 digital cable users, 331,000 broadband Internet customers and 475,000 telephony users.
"Digital cable net adds were better than expectations, offset by lower-than-expected high-speed (Internet) net adds," Bear Stearns analyst Spencer Wang said.
Comcast also continues to see weakness in spot ad sales.
Its ad revenue fell 3% in 2007 and 12% in the fourth quarter alone, and management said things will remain slow at least until midyear. However, COO Steve Burke said Comcast "remains excited" about the outlook for interactive cable advertising.
In December, Comcast lowered its 2007 guidance citing a weak U.S. economy and tough competition. Burke said Thursday his team has started addressing both challenges.
The company has launched a lower-speed and lower-price "economy" broadband package for consumers who don't want to pay $45 for the company's most popular high-speed Web offer, he said.
Plus, the company has started an ad campaign to promote its high-definition TV offerings with the tagline "More. More. More."