Summary
Comcast generated solid cash flow in Q3; debt is a concern.
The company beat earnings expectations, grew metrics; video and voice weaker than other areas, as expected.
Comcast platforms doing well; NBCUniversal also performing, but as with all studios, comparisons can be tough.
Sky is arguably the story for most Wall Street analysts.
Comcast's valuation seems reasonable, but with the Sky purchase, it would be wise to consider the stock riskier today than some months ago.
Introduction: Cash Flow/Debt
Comcast (CMCSA) continues to generate good cash flow for dividend payments, repurchases and investing. The multichannel video programming distributor recently reported earnings results that demonstrate its ability to utilize valuable assets for long-term growth, even in the face of a changing media world.
With Comcast, investors pay attention to the cash flow because the company is, in a sense, utility-like. Many consumers consider cable/broadband to be indispensable in their day-to-day lives. Right at the top of the Q3 release, management mentions the amount paid in dividends (roughly $870 million) and share repurchases ($1.3 billion). Let's add what the company spent on capital improvements ($2.4 billion) and you've got about $4.6 billion. The company generated just under $6 billion in cash from operations.
Comcast is going to need its cash-generating skills as it absorbs the Sky operation. Remember that whole battle that involved Disney (DIS) and Fox (FOX) (FOXA)? Seems like a long time ago, but it wasn't. Comcast ended up acquiring the asset, and shareholders are counting on management's ability to properly integrate it into its plans for the future. Sky would seem better off with Comcast as opposed to Disney, the latter of which has its own distractions with buying Fox's entertainment properties and starting its own streaming service. Comcast knows the multichannel-bundling business and how to create solid user experiences for its platforms.
