Is Comcast Enticing Post-Earnings?

With shares of Comcast (NASDAQ:CMCSA) trading around $54, is CMCSA an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Comcast is a provider of entertainment, information, and communications products and services. The company operates in five segments: cable communications, cable networks, broadcast television, filmed entertainment, and theme parks. Comcast offers television, video, high-speed Internet, and voice services to residential and business customers. It also operates NBC and Telemundo broadcast networks; provides filmed entertainment under the Universal Pictures, Focus Features, and Illumination names; and operates theme parks, studios, and a dining, retail, and entertainment complex.

Comcast today reported results for the quarter ended June 30, 2014. Consolidated Revenue Increased 3.5 percent, Operating Cash-Flow Increased 7.0 percent, and Operating Income Increased 10.7 percent. Earnings per Share Increased 16.9 percent to $0.76; Excluding Gain on a Sale and Transaction-Related Costs, EPS Increased 15.4% to $0.75. Quarterly Dividends and Quarterly Share Repurchases Increased 31.7 percent to $1.3 Billion. Brian L. Roberts, Chair and Chief Executive Officer of Comcast Corporation, said: “We continue to see strong momentum across our cable and content businesses. In Cable, we posted the best second quarter customer results for both video and high-speed Internet in six years and saw tremendous demand for our X1 product, which is a truly transformative experience. We are also pleased with the continued rapid growth of business services, which has quickly become an important engine for the company. NBCUniversal had another excellent quarter with double-digit operating cash flow growth driven by solid results in each segment and a first place finish for NBC for the 2013/2014 broadcast television season.”

T = Technicals on the Stock Chart Are Strong

Comcast stock has been surging higher over the past couple of quarters. The stock is currently trading near all time highs and looks poised to continue. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Comcast is trading above its rising key averages which signal neutral to bullish price action in the near-term.

CMCSA

(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of Comcast options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

Comcast options

16.89%

10%

8%

What does this mean? This means that investors or traders are buying a small amount of call and put options contracts, as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

August Options

Flat

Average

September Options

Flat

Average

As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a small amount of call and put option contracts and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Increasing Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Comcast’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Comcast look like and more importantly, how did the markets like these numbers?

2014 Q2

2014 Q1

2013 Q4

2013 Q3

Earnings Growth (Y-O-Y)

16.92%

31.48%

27.92%

-16.67%

Revenue Growth (Y-O-Y)

3.53%

13.70%

6.21%

-2.38%

Earnings Reaction

1.49%*

1.90%

1.63%

-1.29%

Comcast has seen increasing earnings and revenue figures over the last four quarters. From these numbers, the markets have been pleased with Comcast’s recent earnings announcements.

* As of this writing

P = Weak Relative Performance Versus Peers and Sector

How has Comcast stock done relative to its peers, Time Warner Cable (NYSE:TWC), DirecTV (NASDAQ:DTV), Dish Network (NASDAQ:DISH), and sector?

Comcast

Time Warner Cable

DirecTV

Dish Network

Sector

Year-to-Date Return

3.56%

8.08%

25.82%

11.09%

8.57%

Comcast has been a poor relative performer, year-to-date.

Conclusion

Comcast provides communications and entertainment products and services to consumers and companies. The company today reported a better-than-expected rise in quarterly profit. The stock has been surging higher over the past couple of quarters and is currently trading near all time highs. Over the last four quarters, earnings and revenues have been on the rise, which has left investors pleased. Relative to its peers and sector, Comcast has been a poor year-to-date performer. Look for Comcast to OUTPERFROM.

Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

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