Don't Like Comcast? You're Missing the Big Picture

Last Nov. 25 was Black Friday, the time when shoppers awaken in the dark of night to partake of values being offered by their favorite retail establishments. The day was also aptly named for Comcast (NAS: CMCSA) , given that the cable operator saw its share price slide below $21, or 15% under its month-earlier level.

Comcast's rebound
Since that dark day, however, Comcast's shares have climbed steadily, closing Thursday about 40% above that holiday-season low. I must admit to being something of a Johnny One-Note on the company. In the past decade, when I was honored to be named to The Wall Street Journal's All-Star Research Team in the "cable and broadcasting" category, the paper noted in its write-up that Comcast was my favorite stock. As it relates to the often topsy-turvy media space, I haven't changed my mind, despite the frequent difficulty in ginning up interest in Comcast among Foolish investors.

The company clearly continues to move forward. In the most recent quarter, it expanded its profit by 30%, on revenues that grew by 23% to $14.88 billion. On a pro forma basis, as if the company had acquired its 51% of NBCUniversial from General Electric (NYS: GE) on Jan. 1, 2010, rather than in late January of 2011, the earnings growth was 9.6%. Operating cash flow -- that's operating profit before depreciation and amortization, an important metric in the cable industry -- grew by 15.3%. Earnings per share expanded 32.4% to $0.45, from $0.34 in the first quarter of 2011.

Video's small slide
As has been the case for several quarters, the number of video customers slid, this time by a relatively small 37,000. Conversely, high-speed Internet subscribers increased by 439,000, while the cadre taking voice from the company grew by 164,000. On a revenue basis, the business services unit, which generally provides voice, Internet, and cable services to relatively small commercial entities, expanded its year-over-year contribution to the company by an impressive 37%.

Comcast has changed dramatically since I began observing the company. Slightly more than a decade ago, its offerings served about 8 million cable subscribers and a smaller number of data customers. Today the cable subscriber count stands at slightly more than 22 million. And while it owned a few cable networks -- including The Golf Channel, a portion of the QVC shopping network, and a sports network -- today its majority stake in NBCUniversal has added a myriad of cable networks, broadcast operations, and film studios. In the most recent quarter, the NBC unit increased its year-over-year revenue by 18%.

An app a day keeps the competition away
While in days of yore I occasionally became frustrated by what I considered to be the cable industry's overly deliberative pace in adding new applications, Comcast is on something of a tear of late. Brian Roberts, Comcast's CEO -- who heads up one of the more capable management teams I have encountered in any industry -- said on his company's call:

Just in late February, we launched Streampix, which expands our video offering with thousands of library movies and TV series available to stream anywhere. It's early, and the content choices will expand greatly throughout the year. But we now have a couple million customers who have access to Streampix.

He also said that the company's Xfinity Home, which provides "a compelling service that incorporates home security, home control, and energy management," is now available in 72% of Comcast's footprint. And he added: "We're getting ready to expand availability of our X1 cloud-based user interface to hundreds of thousands of homes this year. And just a couple of days ago, we expanded the reach of our cross-marketing partnership withVerizon Wireless (NYS: VZ) to six new markets."

Comcast was not the only member of the cable contingent to post a solid quarter. A week earlier, Time Warner Cable (NYS: TWC) told us that its earnings grew by 18%, despite a 5% increase in programming costs, the bugaboo of all cable operators. On Thursday, however, Cablevision (NYS: CVC) reported that a decline in its cable earnings had reduced the company's overall bottom line by a substantial 45%. The Long Island-based operator also indicated that it intends to explore opportunities to jettison its ill-fitting Clearview Cinemas.

The Foolish bottom line
Looking at the big picture, however, I'd be hard-pressed to become more convinced that Comcast remains the star of the cable show and that it merits attention from a higher number of Foolish investors. As such, I'd strongly recommend that you begin by adding Comcast to your individual version of My Watchlist.

At the time thisarticle was published Fool contributorDavid Lee Smithdoesn't have financial interests in any of the companies named in the article above. The Motley Fool has adisclosure policy. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.

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