Market commentary: Comcast’s earnings beat, Lufthansa swing into profit

On Monday stocks posted gains in Europe and US, while the selloff in the bond markets continued with investment grade and sovereign papers extending losses while the record low yields rose across the board. The local Malta Government Stocks were not exception, posting losses on high volumes with retail investors pressing the “SELL” button in an attempt to take some profits off the table.

Comcast Corp. reported its first quarter earnings before the opening of the US markets on Monday beating expectations on both profit and revenue. The positive performance of the largest US cable provider somewhat reinsured investors showing that, despite killing its $45 billion merger with Time Warner Cable due to regulatory opposition, the company has been doing much better than its rival.

In contrast, Time Warner Cable last week reported very disappointing results that missed on revenue and especially profit, posting a Q1 EPS that was $0.23 short of market’s projections.

Comcast reported revenue of $17.85 billion, up 2.5% from last year and almost half a billion ahead of analysts’ estimations. While the largest revenue source remained the Video division, but growth was mainly driven by High-Speed Internet that brought in $3.04 billion, 10.7% up from same period last year, and Business Services that posted a 21.4% growth rate accounting for $1.11 billion.

Cable networks and Broadcast television were the most disappointing divisions witnessing declining revenues which dropped by 5.9% and 14.2% respectively. Profit for the first quarter was higher than expected resulting in an EPS of $0.79 per shares, 16.2% up from the previous year and $0.05 ahead of estimations.

EBITDA was also better than expected, while the company’s free cash flow remained flat at $3.2 billion. The strong results prompted Comcast to increase its buyback program by an addition $2.5 billion while it left its quarterly dividend unchanged at $0.25 per share, yielding 1.70% at yesterday closing price.

Shares jumped at the opening on Monday, despite paring most of the initial gains throughout the session and closing 0.63% on the day. The stock has appreciated 12.97% over the past 12 months.

On the European side of the Atlantic, Lufthansa AG, the largest German airline, reported its first quarter results this morning, swinging into profit and narrowing its full year net loss. The German airline reported €425 million profit compared with a loss of €252 million last year, boosted by a revenue growth of 8% and by the sale of its stake in Jetblue Airways Corp. that brought in around €503 million.

The reported results, helped by lower fuel costs, beat analysts’ expectations for a €179 million quarterly loss and helped the firm narrowing its full year loss mainly caused by pilots’ strikes, soaring pension’s costs and the fallout of a deadly crash occurred earlier this year that cost 150 lives.

Lufthansa’s shares dropped as much as 1.5% at the opening this morning but managed to recover throughout the morning session turning positive adding 0.50% at 11am. Although the company declared a €0.4 dividend, the stock has lost almost 28% over the past 12 months, and the company is still struggling to implement its turnaround plan in the face of increasing competition from low cost carries and a prolonged dispute with its workers’ union over wages and retirement benefits.

This article was issued by Paolo Zonno, Trader/Analyst at Calamatta Cuschieri. For more information visit, www.cc.com.mt . The information, view and opinions provided in this article is being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice. Calamatta Cuschieri & Co. Ltd has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website.

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