Comcast Profit Jumps; To Resume Dividends, Buyback
Comcastsaid it would resume annual dividend payments and set a 2009 target to complete its $7 billion stock buyback program, addressing investors' demands to boost its beleaguered share price.
Shares of the top U.S. cable operator rose nearly 8 percent Thursday after it also reported a 54 percent rise in fourth-quarter profit and an increase in digital video, broadband Internet and phone subscribers.
"Investors were desperate for a sign that this company is ready to return cash to shareholders," Bernstein Research analyst Craig Moffett said. "They got that in spades today."
By putting a defined timeline on the buyback and repurchasing $1.25 billion in the fourth quarter, Moffett said, the company clearly signaled its confidence in future cash flow prospects.
Comcast set its annual dividend at 25 cents per share, totaling about $750 million, and will pay a quarterly installment on April 30. The company, whose last dividend payment was in March 1999, told analysts on a conference call that the payout would rise over time.
At Wednesday's close, shares of Comcast had lost 39 percent of their value from a high set last July, as subscriber growth slowed due to a weaker U.S. economy and increased competition from phone and satellite companies.
That's why in January, investment advisory firm Chieftain Capital, which held about 2 percent of Comcast shares, wrote to the board calling for the ouster of Chief Executive Brian Roberts and for dividends to resume.
Chieftain Capital's Glenn Greenberg was not immediately available for comment.
Faced with criticism from shareholders demanding better returns, Comcast ramped up its share buyback in the fourth quarter to $1.25 billion, compared with about $447 million a year earlier.
Outlook Seen Conservative
Net income for the quarter rose to $602 million, or 20 cents per share, from $390 million, or 13 cents per share, a year earlier. The results were 2 cents per share higher than the analysts' average forecast, according to Reuters Estimates.
Operating cash flow, the change in the company's net cash position, rose 19 percent to $3.08 billion.
Revenue increased 14 percent to $8.01 billion, compared with analysts' estimates of $7.94 billion.
Goldman Sachs called the results "mediocre," as the company attracted fewer new customers, but generated strong growth in free cash flow, the amount of money left after all expenses and capital expenditures.
Comcast said it had lost 94,000 basic video subscribers, while adding 523,000 for digital video, 331,000 for broadband and a net 475,000 for phone service.
The company said it expected full-year 2008 consolidated revenue and operating cash flow growth of 8 percent to 10 percent, with consolidated capital expenditures falling to 18 percent of revenue.
Consolidated free cash flow growth is expected to rise at least 20 percent above 2007's $2.3 billion.
Analysts said the outlook was conservative. Goldman Sachs analyst Ingrid Chung estimated Comcast would be paying out some 30 percent of its 2008 free cash flow to shareholders.
No Interest in Yahoo, CEO Says
CEO Roberts responded to market rumors by saying the company would not enter a bidding war with Microsoft for Yahoo. Nor is Comcast interested in Sprint Nextelor other major acquisitions.
"We are committed to remaining disciplined," Roberts told analysts on a conference call. "To be clear, we are not spending any time on any of the large transformative acquisitions that have been speculated about like Yahoo or Sprint."
Microsoft offered to buy Yahoo for an estimated $42.1 billion, stoking speculation that other companies would submit rival bids.
Comcast shares were up $1.36, or 7.6 percent, at $19.17 in morning Nasdaq trade. In comparison, Time Warner Cable rose 3.9 percent to $25.50 on the New York Stock Exchange.
On Wednesday, Comcast founder Ralph Roberts relinquished his salary of about $1.85 million for 2007. He is currently an advisor to his son, CEO Brian Roberts.