Despite looming macroeconomic concerns, leading TV and Internet provider Comcast Corporation’s (CMCSA) third-quarter revenue edged past Wall Street’s expectations because of a steady rebound in its theme parks and studios businesses. Its studios business’ profit tripled to $537 million in the quarter.

In the fiscal third quarter, the company’s Cable Communications line rolled out multi-gig broadband speeds in markets across the U.S., and the company also announced the launch of Even Faster, a multi-gig symmetrical speeds beginning in 2023.

CMCSA has gained 3.6% over the past month to close the last trading session at $35.35.

In addition, the stock has a spectacular dividend-paying record. The stock pays a $1.08 per share dividend annually, translating to a 3.06% yield. It has a 4-year average yield of 2.07%. The company’s dividend has grown at a CAGR of 8.9% over the past three years and at an 11.7% rate over the past five years.

CMCSA has increased its dividends for five consecutive years and has been continuously paying dividends for the past 13 years.

Here’s what could shape CMCSA’s performance in the near term:

Recent Positive Developments

On December 12, 2022, CMCSA launched the world’s first live, multigigabit symmetrical Internet connection powered by 10G and Full Duplex DOCSIS 4.0. 10G technology. The technology promises to offer customers next-level net speed and performance and is expected to boost CMCSA’s product portfolio significantly.

Last month, CMCSA announced the opening of its new Xfinity store in Mill Creek to meet the growing needs of its local customers in Snohomish County. The expansion should help the company serve diverse markets.

Earlier in September, CMCSA announced that its Board of Directors increased its share repurchase program authorization to a total of $20.0 billion. As of September 30, 2022, Comcast had $19.5 billion available under its share repurchase authorization. This demonstrates the company’s financial strength and commitment to enhancing shareholder value.

Robust Financials

In the fiscal third quarter ended September 30, CMCSA’s Cable Communications revenue rose 2.6% year-over-year to $16.54 billion. Its adjusted net income came in at $4.22 billion, up 4.5% year-over-year, while its adjusted EPS increased 10.3% year-over-year to $0.96.

Also, its adjusted EBITDA grew 5.9% year-over-year to $9.48 billion in the same quarter.

Strong Profitability

CMCSA’s trailing-12-month gross profit margin of 68.41% is 35.97% higher than the industry average of 50.32%. Also, its trailing-12-month EBIT and EBITDA margin of 18.91% and 30.40% are 104.46% and 60.38% higher than their respective industry averages of 9.25% and 18.95%.

Moreover, its trailing-12-month levered FCF margin of 9.34% is 16.85% higher than the 8% industry average. Its ROTC and CAPEX/Sales of 7.55% and 8.63% are 83.65% and 121.30% higher than their respective industry averages of 4.11% and 3.90%.

Discounted Valuation

In terms of forward non-GAAP PEG, the stock is currently trading at 0.87x, which is 37.37% lower than the industry average of 1.38x. Also, its forward EV/EBIT of 10.89x is 26.26% lower than the industry average of 14.76x. Moreover, CMCSA’s forward Price/Cash Flow of 5.82x is 35.27% lower than the industry average of 9.00x.

Impressive Growth Prospects

Analysts expect its EPS to grow 7.4% year-over-year to $0.83 in the fiscal fourth quarter ending December 2022. Similarly, they expect its revenues to rise marginally year-over-year to $30.47 billion in the same quarter.

CMCSA’s revenues and EPS are likely to rise 4.2% and 12.3% year-over-year to $121.29 billion and $3.63 in the current fiscal year ending December 2022. In addition, the company has an impressive earnings and revenue surprise history, as it has surpassed its consensus EPS and revenue estimates in each of the trailing four quarters.

POWR Ratings Reflect Solid Prospects

CMCSA has an overall grade of B, equating to a Buy rating in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight different categories. CMCSA’s B grade in Growth is in sync with its robust financials.

Its strong profitability justifies its B grade in Quality.

The stock is ranked first among the nine stocks in the Entertainment – TV & Internet Providers industry.

Beyond what is stated above, we have graded CMCSA for Stability, Sentiment, Value, and Momentum. Get all CMCSA ratings here.

Bottom Line

CMCSA recently rolled out the world’s first live, multigigabit symmetrical Internet connection, which might boost its market presence and help it stay afloat in the industry.

Moreover, with its strong profitability, discounted valuation, consistent dividend-paying record, and favorable analyst sentiments, the stock is poised to soar in the near term. So, I believe it could be a solid buy now.

CMCSA shares were trading at $34.75 per share on Thursday afternoon, down $0.60 (-1.70%). Year-to-date, CMCSA has declined -29.13%, versus a -17.32% rise in the benchmark S&P 500 index during the same period.

About the Author: Kritika Sarmah

Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities. More...

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