Comcast expected to ride Internet and sports to Q1 gains, but analysts wary of TWC merger

Comcast (NASDAQ: CMCSA) will rely on two of its strengths--super-fast broadband and televised sports via its NBCUniversal group--to deliver "significantly higher" first quarter earnings, analysts predict ahead of tomorrow's earnings report.

A story in the International Business Times predicts that the MSO will post revenue that increases 11.2 percent to $17.03 billion. The growth, the story notes, is driven by "demand for broadband Internet" at Comcast Cable and "NBC's exclusive coverage of the 2014 Sochi Winter Olympics," which boosted Comcast's ad dollars at NBCUniversal.

The IBT prediction is echoed by a Seeking Alpha note, which predicts that revenue will be $17.04 billion in the quarter, "spurred by … a 5.2 percent increase for cable communications" driven by increases in high-speed Internet and an even bigger increase in business services.

The gains will likely be announced in the midst of Comcast's ardent but contentious battle to acquire Time Warner Cable (NYSE: TWC) for $45.2 billion. That has already sparked some investor concern, considering the depth of regulatory details in which the two companies are embroiled.

While opposition to the deal comes from the expected sources--consumer groups, trade organizations, unions and some politicians--it's really "much more straightforward" than Comcast's previous acquisition of NBCUniversal, Macquarie Capital analyst Amy Yong says in a research note quoted by IBT. That acquisition drew about as much controversy as the present one--especially from those concerned that Comcast would control too much of the media with the acquisition--and resulted in a number of federally mandated and volunteered conditions.

The same potential concentration of power from the number one cable provider acquiring the number two provider has critics enraged and investors concerned with the TWC move. Comcast shares have dropped 13 percent since the merger's announcement, ISI analyst Vijay Jayant said in a research note.

Shareholder and market concerns, though, are "likely a minor blip in an otherwise robust industry," the IBT story said, noting that 22 of 28 analysts polled by Thomson Reuters this quarter rated Comcast as either a buy or a strong buy.

Among that group of analysts is Brean Capital which, in a report cited by Benziga, trims its price for Comcast from $63 to $60 but reiterates a buy rating.

"We think this deal will get done with a minimum of fuss and we see the potential for upside to Comcast's forecast for synergies," the Brean Capital note said. "We are trimming our target price on CMCSA to reflect the general pullback in cable multiples; however we still see the potential for significant upside" in Comcast stock.

For more:
- the International Business Times has this story
- see this story
- and this report

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