Results of Comcast (CMCSA) Q1 2020: profits drop by almost 40%

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Comcast announced a nearly 40% drop in first quarter profits on Thursday, despite major bumps in its cable and broadband divisions, with coronavirus restrictions keeping customers at home.

Here’s how the company did it:

  • EPS: 71 cents, adjusted
  • Revenue: $ 26.61 billion

Comcast shares fell 7% after rising 2% in pre-market trading after the company said on its profit call that it would lose about $ 500 million if the theme parks were closed until June. He also said that advertising would drop “significantly” in the second quarter. Sky, which also helps generate advertising revenue through sports and other programs, took a hit in the quarter as customers can suspend sports plans and it is unclear when sports will resume.

Wall Street forecasted earnings per share of 68 cents on revenue of $ 26.75 billion, based on consensus estimates from Refinitiv. However, it is difficult to compare the reported earnings to Comcast’s first quarter analysts’ estimates, as the coronavirus pandemic continues to hit global economies and makes the impact of earnings difficult to assess.

Comcast posted net earnings of $ 2.1 billion for the first quarter. This is about 40% less than in the first quarter of last year, when Comcast made more than $ 3.5 billion. Adjusted net earnings were $ 3.3 billion, down 6% year over year. The adjustments take into account one-off investment items, loss on early repayment of debt, costs related to the Sky transaction and amortization of intangible assets related to the acquisition.

Comcast’s NBCUniversal segment, which includes broadcast and cable channels, as well as theme parks and studios, saw sales fall 7% to $ 7.7 billion in the first quarter. The Comcast segment was the most affected during the quarter.

However, Comcast saw a boost from its cable and broadband divisions as the coronavirus pandemic kept American households mostly indoors. Cable revenues jumped 4.5% year-over-year, helped by a 52% increase specifically in wireless revenues.

“Our digital tools have been instrumental in this time of need,” said CEO Brian Roberts when calling investors. “The investments we have made each year in our products and our broadband network are paying off. “

An 8.8% increase in television revenues also helped offset headwinds in other segments which felt particular impacts from the Covid-19 epidemic.

“Although some parts of our business were more affected by COVID-19 than others, we continued to innovate. We are distributing our content in new ways, as evidenced by the recent launch of Peacock on X1 and Flex, “said Roberts in Liberation.

Headwinds Covid-19

Comcast’s film entertainment revenues fell 22.5% year over year, generating $ 1.4 billion in total revenues, and theme park revenues fell 31.9%, penalized by park closures and representing only $ 869 million in total revenue. The company temporarily closed its Universal theme parks, which generated $ 1.56 billion in total revenue in the last quarter.

If the theme parks remain closed until June, Cavanagh said the company expects EBITDA loss of $ 500 million.

“There is no doubt that our theme parks will reopen and in doing so, I think we will benefit from strong pent-up demand,” said Roberts.

Universal has also delayed some of its films, including “Fast and Furious”, a potential blockbuster that was originally scheduled to be released in May. But Universal has also had some success with new films. This month, he released “Troll World Tour” through various streaming and on-demand services as digital rental rather than in theaters. The company said this week that the film has generated $ 100 million in revenue so far.

Comcast chief financial officer Michael Cavanagh said in his earnings call that he expects “substantial” decline in film revenues, most of which will come in the second and third quarters.

The company has also hit advertising revenue, which analysts say could have global consequences.

Advertising revenues decreased 2.2% in the quarter, “reflecting lower ratings and reduced advertiser spending due to the postponement of sporting events due to COVID-19, partially offset by higher price, “said the company.

Cavanagh said he expects a “significant” drop in advertising in the second quarter.

World sporting events were halted or canceled during the quarter in an effort to reduce the spread of the virus, essentially disrupting live sports programming. The 2020 Tokyo Olympics, for example, have been postponed to 2021, which could put pressure on Comcast’s annual revenues, as its NBCUniversal division is the sole provider of game broadcasting rights.

Roberts said he thought the return of sports to the air would be welcomed, whether the stadiums were full or not.

The company said Sky, the UK broadcaster it acquired in 2018, saw its revenues drop 5.8% to $ 4.5 billion in the first quarter of 2020. Comcast cited a drop in direct revenues , ad revenue and content revenue.

Sky customer relationships decreased from 65,000 to 23.9 million during the quarter, which the company says is due to the postponement of sporting events and the suspension of certain sales channels due to the coronavirus .

The total number of relationships with Comcast customers increased 2.6%, however, adding 371,000 cable subscribers during the quarter. The company added 477,000 high-speed Internet customers. Comcast said it saw a 33% increase in Internet traffic and a 40% increase in wireless data usage over Wi-Fi during the quarter.

The company warned of increased pressure to come in the second quarter as global bottlenecks cause a US economic slowdown threatening spending.

“Our Cable Communications results, although solid in the first quarter of 2020, will be negatively affected in the second quarter by the significant deterioration in domestic economic conditions in recent weeks and by the costs associated with our support for customer connectivity as the population is working more and more and learning from home, “said the company. Disclosure: Comcast owns NBCUniversal, the parent company of CNBC.

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