Comcast Shares Dip on Mixed Earnings: Studios and Theme Parks Lag

Comcast Corporation (NASDAQ: CMCSA) is a global media and technology company that is a powerhouse in the entertainment sector.  Comcast Corporation’s earnings report for the second quarter of 2024 provided a mixed picture to investors, causing its stock price to drop about 5%. Comcast's stock underperformance, down approximately 10% year-to-date, adds another layer of frustration for long-term investors. This decline mirrors the challenging market conditions faced by media and entertainment companies.

Cable & Broadband Hold Steady, But Studios and Theme Parks Drag

Comcast's financial report showed revenue of $29.69 billion, down from last year's mark of $30.51 billion and narrowly missing Comcast’s analyst community estimates of $29.99 billion. The decline in revenue was primarily driven by weakness in the company's film studios and theme parks.

While the company missed revenue projections, it exceeded analysts' expectations for adjusted net income. Comcast reported $3.93 billion in net income, compared with the $4.09 billion analysts had anticipated. However, net income after adjusting for one-time costs like investments and asset amortization of $4.74 billion was above the $4.4 billion estimate.

Comcast Financials: Where the Growth Is, and Where It's Not

Comcast's second-quarter revenue performance was mixed, with strong growth in some areas offset by declines in others. The company's largest business segment, Connectivity & Platforms, which includes cable and broadband internet services, saw a slight increase in revenue, driven by higher average revenue per user (ARPU) for broadband and strong growth in wireless customer lines.

However, Comcast lost 120,000 broadband customers in the second quarter, partly driven by the end of a federal internet subsidy program. The Affordable Connectivity Program subsidized internet access for 23 million U.S. households, and Comcast expects to see further subscriber losses in the third quarter as the program's impact fades.

Comcast's media segment, which includes NBC television networks and the Peacock streaming service, also reported mixed results. Revenue for the segment was up year-over-year, driven by Peacock's strong performance, which saw a 28% increase in revenue and a 38% increase in paid subscribers. However, the streaming service continues to lose money, with an adjusted EBITDA loss of $348 million in the quarter.

Comcast's movie studios and theme park segments were the biggest drags on the company's overall revenue. Studio revenue declined by 27% year-over-year due to a lack of blockbuster movie releases in the second quarter. The theme park business also saw a decline in revenue, with a 10.6% drop due to a post-pandemic slowdown in visitor numbers. Comcast hopes that the opening of its new Epic Universe theme park in Orlando in 2025 will help boost theme park revenue in the future.

Profitability Solid, but Cash Flow Raises Concerns

Comcast reported $10.17 billion in adjusted EBITDA for the second quarter, a slight decrease from $10.24 billion in the prior year period. Adjusted EBITDA is a key measure of Comcast's profitability, and it excludes certain non-cash expenses such as depreciation and amortization and certain one-time charges.

Comcast's free cash flow, a measure of the cash flow available to the company after accounting for capital expenditures, declined significantly in the quarter to $1.34 billion, down from $3.42 billion in the second quarter of 2023. This decline was primarily driven by a tax payment related to the previously announced Hulu transaction and other tax-related matters.

Comcast’s dividends will continue to return capital to shareholders, and share repurchase programs are expected to help with this effort. In the second quarter, the company paid $1.2 billion in dividends and repurchased $2.2 billion worth of its stock for a total return of capital of $3.4 billion.

Peacock's Growth, Olympic Boost, and Epic Universe's Promise

Comcast faces several challenges as it attempts to navigate the evolving media sector. The company is seeking to transition to a more digital and streaming-focused business model while also maintaining its traditional cable and broadband businesses.

The company's Connectivity & Platforms segment strategy focuses on attracting new customers and retaining existing ones by offering competitive pricing and investing in network upgrades. Comcast is also expanding its wireless services and investing in its fiber optic network. However, the company faces intense competition from other telecommunications companies, such as AT&T (NYSE: T) and T-Mobile (NASDAQ: TMUS), and the impact of the Affordable Connectivity Program could continue to weigh on subscriber growth in the near term.

Comcast's media segment is focused on growing its Peacock streaming service and leveraging the NBC networks to capture a larger streaming market share. The company invests heavily in content for Peacock and hopes to attract new subscribers with live sports coverage, including the upcoming Summer Olympics. The company believes that the Olympics will significantly boost revenue for its NBC networks and Peacock, particularly as it will feature extensive coverage across broadcast and cable networks, streaming service Peacock, Spanish language, theater experiences, and social media platforms.

The company's Studios segment seeks to improve its film and television production and distribution, focusing on new releases in the coming months. The company also plans to launch its Epic Universe theme park in Orlando in 2025, which is expected to draw in new visitors and bolster revenue.

Comcast's second-quarter earnings report highlighted the mixed performance of the company's various business segments. Investors and analysts should be closely watching to see how Comcast navigates these challenges and executes its long-term strategy. Key factors to watch going forward include the performance of Peacock, the impact of the Summer Olympics on NBC and Peacock, and the opening of Epic Universe.

The article "Comcast Shares Dip on Mixed Earnings: Studios and Theme Parks Lag" first appeared on MarketBeat.