Analyst bullish on Comcast


After digesting the Q4 results at Comcast Wells Fargo Securities analyst Marci Ryvicker has raised her 2011 earnings estimates and reiterated her “outperform” (buy) recommendation.

The recent acquisition of a majority stake in NBC Universal isn’t what’s driving Ryvicker’s optimism, but rather that Comcast beat expectations across the board in every operational and financial metric. “To us, the real highlights were 1) basic video subs, which were still down but much less than expected and also less than in prior quarters; and 2) ARPU [average revenue per user], which was +10.6% y/y–the highest of any quarter (partly due to advertising, but still a healthy +9.4% core). We also got the enhanced capital return announcement, with a 19% dividend increase to $0.45/share (1.8% yield on the 2/16 closing price) and acceleration of the current share repo ($2.1B remaining), which will now be completed in 2011 versus 2012. The share repo alone added $0.02 to our 2011 EPS [earnings per share] estimate,” she said in a research report.

Ryvicker has added several cents to her EPS estimates for every quarter of 2011, boosting Q1 to 37 cents from her previous 34 cents (both ahead of last year’s 30 cents). For the full year she is looking for EPS of $1.62, compared to actual results of $1.55 for 2010 and up from her previous estimate of $1.48 for 2011. Comcast’s stock closed 2/17 at $25.22, but Ryvicker now has a valuation range of $28-30 for the stock.

Looking at 2011 as if the NBCU joint venture closed on 1/1 (the actual date was 1/28) Ryvicker is forecasting that Comcast’s revenues will rise 3.4% this year to $56.69 billion, with NBCU’s portion up 3.4% to $20.2 billion and the rest of Comcast up 3.3% to $36.49 billion. She sees a big boost in operating cash flow at NBCU, up 32.5% to $4.39 billion, with the rest of Comcast up 3.4% to $14.36 billion. That would result in an overall operating cash flow gain of 9% to $18.74 billion.

Ryvicker is projecting strong growth in NBCU’s operating cash flow over the next few years, rising to just under $8 billion in 2015.