Comcast on Wednesday posted an 8.6 percent drop in second-quarter earnings, as costs associated with its efforts to land a controlling share of NBC Universal took a bite out of the cable operator’s bottom line.
While the deal awaits approval from federal regulators, the legal, filing and operating expenses related to the proposed transaction have added up to approximately $59 million before taxes.
For the three-month period ended June 30, Comcast reported net income of $884 million, or 31 cents a share, down from $967 million, or 33 cents a share, in the year-ago period. The core MSO business saw revenue increase 5.1 percent to $8.95 billion, an improvement reflecting double-digit growth in high-speed Internet and voice subscribers, as well as a robust 22.6 percent gain in local ad sales dollars ($446 million).
Meanwhile, the Comcast Entertainment programming unit––a clutch of networks including E!, Golf Channel, Versus, G4 and Style––boosted Q2 revenue 18.1 percent to $454 million, while operating cash flow improved 34.4% to $152 million. Comcast chief operating officer Steve Burke told investors that the national ad sales gains reflected a strong auto and retail marketplace and ratings momentum at E! and G4.
Per Nielsen, G4 lifted its Q2 prime time ratings by 22 percent, while E! grew its nightly deliveries by 13 percent.
While local and national advertising accounts for around 5 percent of Comcast’s overall revenue haul, Burke said that a merger of Comcast and NBCU assets would command some $10 billion in annual ad sales revenue.
“Advertising has got to be the biggest headline,” Burke said. “We signed the deal when advertising was going backwards. Now we’re seeing it going up, and that’s a big deal.” Burke added that he was optimistic that Comcast would clear the regulatory hurdles that stand between it and a consummated NBCU deal.
"We have been there before where you feel everything goes against you," Burke said, in a nod to Comcast’s fruitless 2004 bid to scarf up The Walt Disney Co. for $54 billion. "This time everything is going our way."
Burke has been leading the charge to close out the NBCU transaction since it was first announced in December 2009. Under the new structure, Burke will run the suite of broadcast and cable networks, which includes flagship NBC as well as high-performance cable channels USA Network, Bravo, Syfy and Oxygen.
Upon completion of the deal, Comcast will own a 51 percent stake in NBCU. Current parent GE will hold the remaining 49 percent share.
All told, Comcast topped the Street’s expectations. When factoring out the costs related to its pursuit of NBCU, the cable giant posted earnings per-share of 33 cents a share, beating the average estimate by 1 cent. Total revenue rose 6.1 percent to $9.53 billion, surpassing analysts’ forecasts of a $9.29 billion Q2 take.
In late-morning trading, shares of Comcast were up 4 cents, or 0.22 percent, to $18.30.