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Comcast Corp. (CMCSA) is slated to release its second quarter 2012 results on Wednesday, August 1, 2012, before the opening bell. The current Zacks Consensus Estimate for the second quarter is pegged at 48 cents per share, representing an annualized growth of 13.62%.

With respect to earnings surprises, Comcast has outperformed the Zacks Consensus Estimate in three out of the trailing four quarters. The average earnings surprise was a positive 1%.

First Quarter Recap

On May 2, 2012, Comcast reported its first quarter 2012 financial results. GAAP net income for the first quarter of 2012 was $1,224 million or 45 cents per share compared with a net income of $943 million or 34 cents per share in the prior-year quarter. Quarterly EPS of 45 cents surpassed the Zacks Consensus Estimate of 42 cents. Total revenue in the first quarter of 2012 came in at $14,878 million, up 9.6 % year over year and well above the Zacks Consensus Estimate of $14,405 million.

Operating margin in the first quarter of 2012 was 18.5% compared with 18.3% in the prior-year quarter. During the reported quarter, Comcast repurchased 25.9 million common share for $750million and paid dividends worth $304 million.

Agreement of Estimate Revisions

In the last 30 days, out of the 18 analysts covering the stock, two analysts decreased the EPS estimate for the second quarter of 2012 while one analyst increased the same. Similarly, for the third quarter of fiscal 2012, out of the 17 analysts covering the stock, only one analyst slashed the EPS estimate.

For fiscal 2012, in the last 30 days, out of the 21 analysts covering the stock, three analysts reduced the EPS estimate but two analysts raised the same. Likewise, for fiscal 2013, out of the 20 analysts covering the stock, one analyst increased the EPS estimates while two moved in the opposite direction.

Magnitude of Estimate Revisions

For the second and third quarter of 2012, during the last 30 days, the current Zacks Consensus Estimate was in line with the previous estimate of 48 cents and 45 cents, respectively. Similarly, for fiscal 2012 and 2013, the current Zacks Consensus Estimate was at par with the earlier estimate of $1.90 and $2.22, respectively.

Earning Surprises

In the previous quarter, Comcast reported EPS of 45 cents, which beat the Zacks Consensus Estimate by 3 cents. The current Zacks Consensus Estimates for the ongoing quarter and the upcoming quarter contain downside potential of 6.25% and 2.22%, respectively (essentially a proxy for future earning surprises). Similarly, for fiscal 2012 and 2013, the Zacks Consensus Estimate contains downside risk of 1.05% and 0.45%, respectively.

Our Recommendation

We believe that continuous share repurchase plan, better churn rate and innovative product offering strategies will drive the stock upward going forward. Moreover, Comcast is also aggressively deploying the DOCSIS 3.0 (also called Wideband) technology to upgrade its existing customers to high-speed network together with all digital networks.

However, higher operating expenses coupled with stiff competition from formidable rivals like Time Warner Cable (TWC) and other satellite operators like DIRECTV (DTV) and DISH Network Corporation (DISH) will affect profitability going forward. Moreover, huge debt, higher operating expense coupled with continuous loss of video subscribers will affect its bottom-line growth. We, thus, maintain our long-term Neutral recommendation on Comcast.

Currently, Comcast has a Zacks #3 Rank, implying a short-term Hold rating on the stock.

 
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