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„El Clasico”in media industry
vs
Martyna Zdziebło
Justyna Bąk
Ali EL Shaeri
Emma Qi Yang
Maria Albarracin Ortiz
María Bernabé
Match Referees
AGENDA:
1. Quick facts about both companies2. Industry description3. Industry majors players global comparison 4. Products5. Financial Statements6. Financial Ratios7. Du Pont Equation 8. Mix Analysis9. Capital, Research&Development, Advertising
Expenditures10.Correlation Coefficient11.Altman Z-score12.Hot news about Media Industry
Media Industry Media
Communications Sector Communications
CMCSA Market Symbol TWC
$136.43 B Market Capitalization $37.66 B
12/ 31/2013 Fiscal Year End 12/ 31/2013
136 000 Number of Employees 51 600
Philadelphia, Pennsylvania at One Comcast Center
Headquartes New York City, New York
Team Quick Facts
3.6 x
2.6 x
Foundation
1963Ralph Roberts
1963
built on a strategy of mergers and acquisitions
1990
1963
American Television and
Communications (ATC) is founded
1973
• Time Inc. acquires 9% of ATC
• Warner Communications forms Warner Cable
1989 1992 2009
Merger of Time Inc. and Warner Communications
for $14.9 billion announced, later to
become Time Warner Inc;
ATC and Warner Cable become Time Warner Cable, a subsidiary of
Time Warner
TWC separates from Time Warner Inc:
Time Warner held a total of 300 million shares of Time
Warner Cable common stock
Key milestones of TWC
Team Leaders
Brian L.Roberts Robert D. Marcus
Brian L.Roberts Robert D. Marcus
55 Age 49
Wharton School, University Pensylvania ‚81
Education Columbia Law School ‚90
CEO, Chairman of the Board, Director, President
POSITION CEO, Chairman of the Board, Former COO, Former President
1998 Director 2013
1990 President 2010-2014
2002 CEO 2014
1994 Chairman of the Board 2014
$31 367 254 Total Annual Compensation in 2013 $8 519 154
+7,7 % Compensation changed from 2012 -15,6 %
Control of 33 1/3% of the voting rights of the Comcast Corporation
Others
Leaders Stats
3.7 x
One of top
America’s
CEOs
One the most influential
executives in cable
according to CableFAX
Worldwide economic overview
Worldwide economic overview
Business description
Source: NCTA estimated Statistics
Cable Industry to GDPCable Industry Infrastructure Expenditure
Source: BEA.GOV by Industry GDP and Economy.com
Industry in which Comcast and TWC operate is very
competitive , customer acquisition is the key to future growth, and that is why the industry is also quite capital
intensive.
Trends are similar!
Industry Price Elasticity Cable Price to CPI
Source: NCTA and NCTA (Average Price for Expanded basic) and BLS for CPI statistics
Delivery of telecommunications
services
Delivery of information to the American consumer
Delivery of entertainment to the American consumer
Industry Functions
10. Rogers Communications Inc.
1. COMCAST CORP.2. DIRECTV3. Time Warner Cable Inc.4. DISH Network Corp.5. Charter Communications Inc.6. Cablevision Systems Corp.7. EchoStar Corp.8. Shaw Communications Inc.9. BCE Inc.
In terms of market share!
BUSINESSESHOUSEHOLDS
INDUSTRY – CUSTOMERS
Cable TV audience: U.S. residents age 12+ who subscribe to either analog or digital cable television service at home.
QUICK FACTS
1. More than 60% of Americans subscribe to cable television.
2. Cable television reaches nearly six in 10 adults age 18-49.
3. Cable subscribers closely mirror the age/gender profile of the average American.
The estimated Sales Growth Rate for the future period in the industry is of
3,97%.
INDUSTRY - SIZE
SALES (Revenues)• $ 202,5 B.
MARKET CAPITALIZATION• $ 652,6 B.
Total dollar market value of the shares outstanding of all companies
in the industry
• Growth in Net Income – Last 5 years: 14,16%• Growth in Revenue – Last 5 years: 3,16%
18 FIRMS
Sources: www.bloomerg.com , http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histgr.html
INDUSTRY - MAJOR PLAYERSIn terms of market
share!
INDUSTRY - MAJOR PLAYERS
INDUSTRY - MAJOR PLAYERS : COMPARISONCOMPANY MARKET SHARE MARKET
CAP.COMCAST 26,70% $147,411
DIRECTV 20,50% $43,900
Time Warner Cable 14,20% $42,672
DISH Network Corp. 9% $32,056
Charter Communications Inc. 5,30% $20,810
Cablevision Systems Corp. 4,10% $5,054
EchoStar Corp. 2,10% $4,709
Shaw Communications Inc. 2,10% $10,630
BCE Inc. 1,50% $37,206
Rogers Communications Inc. 1,10% $17,673
Having a high market share does not necessarily have to mean a high
market capitalization, and viceversa
Notice how BCE Inc’s shares are the fourth
most valued shares even though its market share
is not very high
CFinancial Data 2013 – Comparison with global competitors
Market Capitalization
Gross Margin %
Revenue
Net Income
$ 27,3 B
2nd among the
competitors!
$ 22,12 B
The biggest Revenue!
$ 31,75 B
3rd biggest Revenue!
2nd biggest Revenue!
$ 102,56 B
X3,8$ 64,66 B
X2,0
91,31%82,34%
53,25%
2nd biggest %GM!
4th biggest %GM!
1st biggest %GM!
-8,97%
$ 7,14 B
$ 1,95 B
$ 4,61 B
The biggest NI!
4 th biggest NI!2nd biggest
NI!X1,5
The best company
among the competitors!
Source: www.wikinvest.com/stock/Comcast_(CMCSA)/Data
3rd among the
competitors!
$ 27,11 B
Financial Data 2013 – Comparison with global competitors
Free Cash Flow
Total Assets
Goodwill&Intangibles
Total Liabilities
$ 48,27 B
$ 158,81 B
$ 21,91 B
The biggest Assets!
2nd biggest Assets!
3rd biggest Assets!
X3,3
$ 115,62 B
$ 42,53 B$ 25,99 B
The biggest Debt!
The biggest Goodwill&Intangibles!
The biggest FCF!
2nd biggest Debt!
3rd biggest Debt!
$ 103,79 B
$ 29,76 B $ 10,79 B
2nd biggest Goodwill&Intan
gibles!3rd biggest Goodwill&Inta
ngibles!
3rd biggest FCF!
2nd biggest FCF!
$ 5,36 B$ 2,54 B$ 1,33 B
X2,1
X2,7
X3,5
Comcast is a leader in MEDIA industry – it has the biggest
Revenue, Assets, NI, FCF as well as Market Cap.
TWC is the second largest cable company in the U.S.
Other strong competitors are Direct TV, Discovery
Communications and Virgin Media.
Source: www.wikinvest.com/stock/Comcast_(CMCSA)/Data
INDUSTRY - MAJOR ACQUISITIONS OR EVENTS
QUICK FACTS:• Parties: Comcast and AT&T Broadband
• July 8, 2001, Comcast made a proposal to merge with AT&T’s Broadband
• $72 Billion Transaction• 22 million subscribers• Comcast acquisition of AT&T doubled the size of the company making it in the US larger cable provider
• Income growth through leveraging scale with the addition of new services
The biggest corporate merger of 2001
Nearly double the size of its
next-biggest rival, AOL
Time Warner
Sales growth 117 % !
Net income growth 1282 %
QUICK FACTS• Parties: AOL and Time Warner• Announced on January 10, 2000
• Oficially filed on February 11, 2000
• $164B deal!!!• Ownership: 50%-50%? AOL HIGHER CAPITALIZATION
Even though TW had higher
revenues and far more assets!!!
51%GROWTH AND PROFITABILITY
FELL
2002: $99B LOSS!!!AOL TW’s value fell $226B to $20B
« BIGGEST MISTAKE IN CORPORATE HISTORY »
QUICK FACTS:• Parties: Comcast and GE
• $ 30B deal• Important dates:
December 3, 2009
February 12, 2013
March 2013
NBC Universal was owned by GE
CC announces the intention to complete the acquisition
COMCAST purchases 51% of NBC
ACQUISITION COMPLETED
QUICK FACTS:• Parties: Comcast and Time Warner Cable
• Announced on February 13, 2014
• $45,2B deal• Complete acquisition• 30 million subscribers• 33% of paid TV customers in the U.S
• Currently waiting for permission of the authorities to complete the acquisition.
284,9 million shares
Comcast: 22,6 million+
TWC: 11,2 million
« This transaction is all about increasing competition and
creating more customer benefit as a result of gaining additional
scale »- David Cohen
Comcast Vice-President
QUICK FACTS:• Parties: AT&T and DIRECTV• Announced on May 18, 2014
• $48,5B deal• Aiming to increase AT&T’s market share in the pay TV sector
• Access to new markets• Currently waiting for permission of the authorities to complete the acquisition.
$48,5 B: AT&T will pay DIRECTV
shareholders $95/share in cash and stock
Including assumed debt, the deal amounts
to $67,1B LATIN AMERICA
Product differentiation
Quality of products and services
Triple-Service BundlesIn terms of service, both Comcast & TWC offer similar packages. Comcast’s choices, however, could be streamlined down to 3 or 4 rather than confusing customers with 5 options.
Internet Service Based on nothing else but Netflix ISP rankings.HD DVR & Service Because 90 hours of HD is a lot more than 75 hours!Features Because X1 is way more advanced (if available).Channels Because it’s too hard to do a direct comparison, and a difference of a few channels shouldn’t the tip the scale.Customer Service Based on American Customer Satisfaction Index.
Special OffersHowever, if TWC wants to be more competitive they should give you the HBO and Cinemax for free for six months rather than charge $10 per mo.
PricesBecause that Comcast two years plan just seems too long and complicated with 3 variations (and 2 price increases) throughout the agreement.
TOTAL GOALS
Who is scoring a goal?Products-Services Why?
0 0
00
0 0
4 1
« Amazing Goals Comcast !»
Source: www.comcast.com and www.timewarnercable.com
Marketing Strategies
StrategiesCatalogue site
Costumer-friendlyDynamic pricingPartnership
Personalized advertising
Building siteCommunity-focusedDynamic pricing
Declaration of qualityInvestment in others tech
Different approach De-emphasize the bundle and became more willing to get a broadband-only customerFocuse on the bundle of video, Internet, and phone
Target GroupVideo, high-speed internet andComcast digital voice
customersProfessional Youngsters (Source: Marketing Plan Pro), Upper-
Medium Income Household, and Baby Boomers
SloganIt's Comcastic! ; Xfinity (Comcast) - The future of awesome Enjoy Better
« BRAVO COMCAST! More opportunities and less threats than TWC»
Comparative Income Statement – Horizontal Analysis
(in $ Millions) 2013 2012 $V %V 2013 2012 $V %VTotal Revenue 64 657 62 570 2 087 3,3% 22 120 21 386 734 3,4%Cost of Revenue 19 670 19 929 -259 -1,3% 6 450 6 137 313 5,1%Gross Profit 44 987 42 641 2 346 5,5% 15 670 15 249 421 2,8% Operating Expenses:Research DevelopmentSelling General and Administrative 23 553 22 664 889 3,9% 7 690 7 425 265 3,6%Non Recurring 119 115 4 3,5%Others 7 871 7 798 73 0,9% 3 281 3 264 17 0,5%Total Operating Expenses 31 424 30 462 962 3,2% 11 090 10 804 286 2,6%Operating Income or Loss 13 563 12 179 1 384 11,4% 4 580 4 445 135 3,0% Income from Continuing Operations Total Other Income/Expenses Net 212 992 -780 -78,6% 11 497 -486 -97,8% Earnings Before Interest And Taxes 13 689 14 130 -441 -3,1% 4 591 4 942 -351 -7,1% Interest Expense 2 574 2 521 53 2,1% 1 552 1 606 -54 -3,4%Income Before Tax 11 115 11 609 -494 -4,3% 3 039 3 336 -297 -8,9%Income Tax Expense 3 980 3 744 236 6,3% 1 085 1 177 -92 -7,8% Minority Interest -319 -1 662 1 343 -80,8% -4 4 -100,0% Net Income From Continuing Ops 6 730 7 162 -432 -6,0% 1 954 2 155 -201 -9,3%Net Income 6 816 6 203 613 9,9% 1 954 2 155 -201 -9,3%Preferred Stock And Other AdjustmentsNet Income Applicable To Common Shares 6 816 6 203 613 9,9% 1 954 2 155 -201 -9,3%
COMCAST TIME WARNER CABLE
$64 657 $62 570 $21 386$22 120
X 2,9X 2,9
3,4%3,3%
9,9% -9,3%
As NI rose faster than sales, ROS is going to rise!
Total Revenue
Net Income Applicable to Common Shares
In 2013 Comcast purchased GE’s 49% remaining interest in NBCU (for approximately $16.7 billion). As they own all of NBCU’s NI, they no longer subtract it and that’s why their NI rose so hugely!
The biggest $V!
Costs have not changed enormusly, so they are not the reason of a huge increase in the NI!
Increase in Comcast’s Revenue was primarly due to:
12.4 mln customers subscribed to at least one of HDTV or DVR advanced video services (0,6mln more than in 2012)
Increase in the number of residential High-Speed Internet customers, higher rates from customers receiving higher levels of service
Higher prices and an increase in the volume of advertising units sold
Strong performance of Despicable Me 2 and Fast and Furious 6
Higher guest attendance and increase in per capita spending at the Orlando and Hollywood Theme Parks
Increase in TWC’s Operating Costs and Expenses was primarly due to:
contractual rate increases, carriage of new networks
increased headcount and higher compensation costs per employee
Higher Selling, general and administrative expenses - higher marketing costs (which included the impact of increased spending due to temporary blackouts resulting from programming vendor disputes) and increased facilities costs
$6 816 $6 203 $1 954 $2 155
Increase in TWC’s Revenue was primarly due to:
Price increases and a greater percentage of subscribers purchasing higher-priced tiers of video service,
Growth in average revenue per subscriber and an increase in high-speed data subscribers
Growth in high-speed data and voice Business Services subscribers, as well as increases in cell tower backhaul and Metro Ethernet revenue
Growth in non-political advertising revenue (primarily associated with advertising inventory sold on behalf of other video distributors (“ad rep agreements”))
X3,5 X2,9
As NI fell while Sales increased, ROS is going to fall!
OVERALL:Comcast’s NI looks great (much more better than
TWC’s) but it’s mainly due to the decrease in Minority
Interest and not the Increase in Sales!
Comparative One Day Income Statement – Vertical Analysis
(in $ Millions) 2013 % of sales 2012 % of sales 2013 % of sales 2012 % of salesTotal Revenue 180 100,0% 174 100,0% 61 100,0% 59 100,0%Cost of Revenue 55 30,4% 55 31,9% 18 29,2% 17 28,7%Gross Profit 125 69,6% 118 68,1% 44 70,8% 42 71,3% Operating Expenses:Research Development - - - - - - - -Selling General and Administrative 65 36,4% 63 36,2% 21 34,8% 21 34,7%Non Recurring - - - - 0,3 0,5% 0 0,5%Others 22 12,2% 22 12,5% 9 14,8% 9 15,3%Total Operating Expenses 87 48,6% 85 48,7% 31 50,1% 30 50,5%Operating Income or Loss 38 21,0% 34 19,5% 13 20,7% 12 20,8% Income from Continuing Operations Total Other Income/Expenses Net 1 0,3% 3 1,6% 0,03 0,0% 1 2,3% Earnings Before Interest And Taxes 38 21,2% 39 22,6% 13 20,8% 14 23,1% Interest Expense 7 4,0% 7 4,0% 4 7,0% 4 7,5%Income Before Tax 31 17,2% 32 18,6% 8 13,7% 9 15,6%Income Tax Expense 11 6,2% 10 6,0% 3 4,9% 3 5,5% Minority Interest -1 -0,5% -5 -2,7% 0 0,0% 0 0,0% Net Income From Continuing Ops 19 10,4% 20 11,4% 5 8,8% 6 10,1%Net Income 19 10,5% 17 9,9% 5 8,8% 6 10,1%Preferred Stock And Other Adjustments - - - - - - - -Net Income Applicable To Common Shares 19 10,5% 17 9,9% 5 8,8% 6 10,1%
COMCAST TIME WARNER CABLE
29,2%70,8%
28,7%71,3%
31,9%68,1%
8,8%
30,4%69,6%
10,5%
48,6% 50,1%20,7%21,0%
19 5
X 3,8
+1,2%TWC’s
GM% was higher!
+3,2%
Comcast increased its
GM%!-1,5%
+1,5%
+0,5%
-0,5%
-1,7%
Comcast’s ROS is higher!
+1,5%
-0,3%
Comcast’s Cost of Revenue as % of
Total Revenue was higher than TWC’s!
INCOME STATEMENT:
FOR COMCAST!!!
TWC’s GM% decreased!
Quarterly Revenue and Income
+1,6
%
25,6%
24,0%
+2,1%
+12,4%+16,5%
Revenue and NI were higher in 2Q&3Q of each year – due to increases in consumer advertising in the spring and in the period leading up to and including the holiday season
3Q12's Revenue and NI were boosted by London Olympics
Revenue and NI benefit in even-numbered years from advertising related to candidates running for political office
TWC’s quarterly Revenues were more steady than Comcast’s,
3Q2012’s NI was boosted by London Olympics 3Q2012 benefited from the strong results of the
July 2012 movie "The Dark Knight Rises” (cost $250 million, brought in nearly $1.1 billion globally)
(in $ Millions) 2013 2013 (%) 2012 2012 (%) V$ ( V%) 2013 2013 (%) 2012 2012 (%) V$ (V%)ASSETS
Cash And Equivalents 1 718 1% 10 951 7% -9 233 16% 525 1% 3 304 7% -2 779 16%Short-Term Investments 3 573 2% 1 464 1% 2 109 244% 0 - 150 0% -150 0%Accounts Receivable 6 376 4% 5 521 3% 855 115% 954 2% 883 2% 71 108%Other Current Assets 2 408 2% 2 055 1% 353 117% 665 1% 540 1% 125 123%TOTAL CURRENT ASSETS 14 075 9% 19 991 12% -5 916 70% 2 144 4% 4 877 10% -2 733 44%Property Plant&Equipmnet, Net 29 840 19% 27 232 17% 2 608 110% 14 255 30% 14 004 28% 251 102%Goodwill 27 098 17% 26 985 16% 113 100% 3 196 7% 2 889 6% 307 111%Long-Term Investments 3 770 2% 6 325 4% -2 555 60% 183 0% 382 1% -199 48%Other Intangibles 76 693 48% 77 204 47% -511 99% 27 365 57% 27 390 55% -25 100%Other Long-Term Assets 7 337 5% 7 234 4% 103 101% 1 130 2% 267 1% 863 423%TOTAL ASSETS 158 813 100% 164 971 100% -6 158 96% 48 273 100% 49 809 100% -1 536 97%
Comparative Balance Sheet: Assets
3.3 x 3.3 x
4 % 3 %
84 % 84 %
The major type of asset , almost 50 % of Total Assets in both companies
The assets under this category include mainly:• Franchise rights;• Trade names;• FCC license;• Patents and other
technology rights;• Software;• Customer
relationship;• Cable franchise
renewal costs and contractual operating rights and Other agreements and rights
Franchise rights
The assets under this category include mainly:• Cable franchise
rights (the major part of it) • Customer
relationships• Cable franchise
renewals access rights
Intangible assets consists in 77 % of Franchise rights.
They come from agreements with state and local
authorities that allow access to homes and businesses in cable service areas that were acquired in
business combination.
«Strong barrier to entry to would-be competitor ! »
To sum up, in both companies inangible assets in total assets are huge and it is definitely an area that the firms need to watch for in the
future. Why? While most of them are indefinite-lived assets that can not be lost due to amortization, there is the possibility that
the values may be written down if some of the acquisitions do not work out in the future,
which could be prove problematic.
In 2013 year Comcast reported $29.8 B in PP&E which was 10 % more than in previous year. The grow was mainly due to acquisitions of real estate properties which resulted in increase of $2,2 billion PPE.
In 2013 TWC reported $14,2 B of PP&E which increased only 2 % comparing to previous year.
To sum up, we can say that Comcast was expanded on
more.
In 2013 Comcast reported $27.1B of goodwill which accounts for 17% of assets. This is inline with the $26.98B that it reported in goodwill at the end of 2012.
BUT generally, the big amount of goodwill in Comcast's assets is caused mainly by big acquisitions performed in previous years (the $10.9B in goodwill that was acquired in 2011 with the 51% stake in NBC Universal being purchased for a total consideration of $24.1B. Also contributing was the $982M in goodwill that was acquired when the company purchased the remaining 50% stake in Universal Orlando).
To sum up, goodwill percentages of total assets in both companies is not very
excessive but in Comcast is much higher than TWC, so this is also an area that we
need to watch for Comcast. Goodwill has an accounting value, it has no economic value. if the acquisition does produce the value that was
originally expected, then some of that goodwill might come off of the balance sheet, which could, in turn lead to the
stock going down.
TWC in 2013 reported $3,2 B in goodwill which accounts 7 % of asset. It is similar to 2012 year.
In 2013 and 2012 Comcast's receivables, equal to 10 % and 9% of its revenue,
respectively.
TWC's receivables, equal to 4 % of its revenue in both years.
In case of both companies receivables stated low
percentage of sales so it is seems to be anything to worry about here for either of these
two companies.
In both companies Cash And Equivalents generally stated a low percentage of sales but this type of assets declined the most in both companies.
In 2013 Comcast reported only $5.3 B in cash and equivalents and short-term
investment. Cash decreased 84 %.In 2013 Comcast acquired GE’s remaining 49% common equity
interest in NBCUniversal.The total consideration for these transactions consisted of $11.4
billion of cash on hand.
In 2013 TWC reported only $525 M in cash and equivalents and short-term investment.
Cash decreased 84 %.In 201 TWC completed its acquisition of DukeNet for $572 milion in cash.
(in $ Millions) 2013 2013 (%) 2012 2012 (%) V$ V (%) 2013 2013 (%) 2012 2012 (%) V$ V (%)LIABILITIES & EQUITY
Accounts Payable 5 528 3% 5 324 3% 204 104% 565 1% 647 1% -82 87%Accrued Expenses 7 967 5% 5 931 4% 2 036 134% 1 837 4% 1 805 4% 32 102%Current Portion Of Long-Term Debt/Capital Lease 3 280 2% 2 376 1% 904 138% 1 767 4% 1 818 4% -51 97%Other Current Liabilities 1 239 1% 2 232 1% -993 56% 869 2% 872 2% -3 100%Unearned Revenue, Current 898 1% 851 1% 47 106% 188 0% 183 0% 5 103%TOTAL CURRENT LIABILITIES 18 912 12% 16 714 10% 2 198 113% 5 226 11% 5 325 11% -99 98%Long-Term Debt 44 567 28% 38 082 23% 6 485 117% 23 335 48% 25 172 51% -1 837 93%Deferred Tax Liability Non-Current 31 935 20% 30 110 18% 1 825 106% 12 098 25% 11 280 23% 818 107%Other Non-Current Liabilities 11 384 7% 13 271 8% -1 887 86% 667 1% 749 2% -82 89%TOTAL LIABILITIES 106 798 67% 98 177 60% 8 621 109% 41 326 86% 42 526 85% -1 200 97%Minority Interest 1 321 1% 17 438 11% -16 117 8% 4 0% 4 0% 0 100%Common Stock 30 0% 31 0% -1 97% 3 0% 3 0% 0 100%Additional Paid In Capital 38 890 24% 40 547 25% -1 657 96% 6 951 14% 7 576 15% -625 92%Retained Earnings 19 235 12% 16 280 10% 2 955 118% -55 0% 363 1% -418 -15%Treasury Stock -7 517 -5% -7 517 -5% 0 100% 0 0% 0 0% 0 -Comprehensive Income And Other 56 0% 15 0% 41 373% 44 0% -663 -1% 707 -7%TOTAL EQUITY 50 694 32% 49 356 30% 1 338 103% 6 943 14% 7 279 15% -336 95%TOTAL LIABILITIES AND EQUITY 158 813 100% 164 971 100% -6 158 96% 48 273 100% 49 809 100% -1 536 97%
Comparative Balance Sheet: Liabilities&Equity
60 %
9 %
67 %
2,7 x
85 %86 %
current assets decreased 30 % while the current liabilities increased
by 13 %
Comcast was capable to meet only 74 % of its short term obligations in the recent year while in previous year its current assets were 1,2
times bigger than current liabilities.
Current assets decreased 56 % while the current liabilities declined
by 2 %
TWC was able to meet only 41 % of short term obligatoins the recent year while in
2012 92 %
In both years and in both companies their assets were financed mainly through debt.
While analyzing the debt structure of the company, it is
revealed that their debt structures are heavily based on
long term liabilities as compared to short term. In Comcast current liabilities
stated 18% and 17 % of Total Liabilities respectively and in TWC in both years 13 %.
113 %
117 %
In Comcast the proportion of long term debt is also increasing with a greater percentage as
compared to current liabilities which represents that company is heavily depend on long term debt which is 28% of total assets.
TWC tried to reduce the proportion of long- term debt in financing assets (declined by 7 % )
but it still was almost 50 % of total assets.
Its huge.
Comcast reported $19,24B of retained earnings on its most recent balance sheet, while TWC had a
retained earnings deficit of $55 M on its balance sheet
Going back to the end of 2009, Comcast had retained earnings of $10.0B. So, over the last years, Comcast grew its retained earnings at a cumulative rate of 92,4 %, which is impressive.Comcast was growing its net worth. The more earnings retained, the faster it grows and increases growth rate for future earnings.
This deficit is due mostly to the aggressive share buyback policies being pursued by the management at TWC. For the year ended December 31, 2013, the Company repurchased 24.0 million shares of TWC common stock for $2.526 billion, including 0.4 million shares repurchased for $51 million that settled in January 2014.
.
Minority Interest fell 82 %. In 2013 Comcast acquired GE’s remaining 49% common equity interest in NBCUniversal for approximately
$16.7 billion.
Income Statement 5 Year Growth Rate
2010 2011 2012 2013 2014Revenue 18.868 19.675 21.386 22.120 22.812Gross Marg. 9.927 10.537 9.942 10.342 5.294Net income. 1.308 1.665 2.155 1.954 2.031
2010 2011 2012 2013 2014Revenue 37.937 55.842 62.570 64.657 68.775Gross Marg. 22.687 35.084 42.641 44.987 47.863Net income. 3.635 4.160 6.203 6.816 8.380
68775 22812
x4
Balance Sheet 5 Year Growth Rate
6.8%
-18,24%
A2010 A2011 A2012 A2013 A201445.822 48.276 49.809 48.273 48.50136.612 40.746 42.530 41.330 40.4889.210 7.530 7.279 6.943 8.013
BALANCE SHEET DATATotal AssetsTotal Debt including current portion Shareholders´equity
2010 2011 2012 2013 2014118.534 157.818 164.971 158.813 159.33974.180 110.544 115.615 108.119 106.62844.354 47.274 49.356 50.694 52.721
BALANCE SHEET DATATotal AssetsTotal Debt including current portionComcast Shareholders´equity
159339 48501
1/3
Comparative Cash Flow COMCAST TIME WARNER CABLE
(in $ Millions) 2013 2013Operating Acitivities 14 608 4 864Net income 6 816 1 954Depreciation and amortization 7 871 3 281Change in Accounts Receivable -855 -71Change in Other Current Assets -353 -125Change in other LT Assets -103 -863Change in Accounts Payable 204 -82Change in Accrued Expenses 2 036 32Change in other Current Liabilities -993 -3Change in Unearned Revenue, C 47 5Change in Deferred Tax Liability NC 1 825 818Change in Other NC Liabilities -1 887 -82Investing Activities -9 594 -2 758Capital expenditures -10 479 -3 532Change in STI -2 109 150Change in Goodwill -113 -307Change in LTI 2 555 199Change in Other Intangibles 511 25Change in Comprehensive Income 41 707Financial Activities -14 247 -4 885Stock issued -1 0Dividends paid -3 861 -2 372Change in Current Portion Of LT Debt 904 -51LT Debt 6 485 -1 837Minority Interest -16 117 0Change in Additional Paid In Capital -1 657 -625
Increase (decrease) in cash and cash equivalents -9 233 -2 779
Operating activities 14 608 4 864Net Income
Investing Activities
Financial Activities
-2 779-9 233Increase/Decrease in cash and cash equivalents
Depreciation and Amortization
Capital expenditures
6 8167 871 3 281
-9 594
-14 247
-10 479-2 758-3 532
1 954
-4 885
-2737Dividends paid -3 861
X3,0
46,7% of OCF53,9% of OCF
40,2% of OCF67,5% of OCF
X3,5
X2,9
71,7% of OCF 72,6% of OCF
26,4% of OCF 56,3% of OCF
Change in LT DebtChange in Current portion of LT Debt 904
6485-51
-1837
Comcast took out huge debt!
TWC is repaying its debt, but debt is still huge!
Minority Interest -625-1 657 X3,3
Comcast acquired GE’s 49% remaining common equity interest in NBCU for approximately$16.7 billion.
TWC completed its acquisition of DukeNet for $572 million in cash (including the repaymentof debt), net of cash acquired and capital leases assumed.
BOTH COMPANIES HAVE CASH OUTFLOW!!!
5 year Cash Flow
1963X2,1 X2,5 X2,7 X2,5 X2,7
Comcast’s OCF was more than 2 times
bigger than TWC’s in each year.
X2,0 X3,5 X0,4 X2,7 X2,1
Comcast’s Investing CF was 0,4 – 3,5 times bigger than TWC’s.
X2,9X2,7X1X221,5X0,4
Comcast’s Financing CF was 0,4 – 221,5 times bigger than
TWC’s
That’s why Comcast can buy TWC!
-5 056
5 year Operating Cash Flow – top items
1963
1. Depn& amort 2. Net income3. Deferred income
taxes
1. Depn& amort2. Other working
capital3. Amort. of debt
discount
1. Amort. of debt discount
2. Other working capital3. Net income
1. Other working capital
2. Amort. of debt discount
3. Depn& amort
1. Net income2. Depn& amort 3. Other working
capital
1. Net income2. Depn& amort3. Deferred income
taxes
1. Depn& amort2. Net income3. Deferred income
taxes
1. Depn& amort2. Net income3. Deferred income
taxes
1. Depn& amort2. Net income3. Deferred income
taxes
1. Depn& amort2. Net income3. Other non-cash
items
Depreciation&Amortization, NI and other working capital were the biggest drivers of
Comcast’s OCF
Depreciation&Amortization, NI and deferred income taxes
were the biggest drivers of TWC’s OCF
5 year Investing Cash Flow - top items
1963
COMCAST's 5 year Operating Cash Flow
1. Investments in PPE2. Other inv. activities3. Purchases of
intangibles
1. Investments in PPE2. Acquisitions, net3. Other inv. activities
1. Investments in PPE2. Purchases of
investments3. Other inv. activities
1. Investments in PPE2. Purchases of
intangibles3. Other inv. activities
1. Investments in PPE2. Other inv. activities3. Acquisitions, net
1. Investments in PPE2. Other inv. Activities3. -
1. Investments in PPE2. Acquisitions, net3. Sales of intangibles
1. Investments in PPE2. Other inv. activities3. Purchases of
investments
1. Investments in PPE2. Other inv. Activities3. -
1. Investments in PPE2. Sales/Maturities of
investments3. Purchases of investments
Investments in PPE and other
investing activities were the biggest drivers of both companies’ ICF
2010 2011 2012 2013 2014 2010 2011 2012 2013 201496% 50% 447% 80% 76% 102% 83% 93% 93% 101%
Comcast TWCInvestments in PPE as % of ICF
Both companies were spending more than 50% of their ICF in each
year on themselves (CAPEX)!
5 year Financing Cash Flow - top items
1. Debt issued2. Common stock
repurchased3. Debt repayment
1. Debt issued2. Common stock
repurchased3. Debt repayment
1. Common stock repurchased
2. Debt issued3. Debt repayment
1. Debt repayment2. Common stock
repurchased3. Dividend paid
1. Other financing activities
2. Debt issued3. Debt repayment
1. Debt issued2. Other financing
activities3. Dividend paid
1. Debt repayment2. Debt issued3. Common stock
repurchased
1. Debt repayment2. Dividend paid3. Debt issued
1. Debt issued2. Common stock
repurchased3. Dividend paid
Debt issued, common stock repurchased,
debt repayment and dividend paid were
the biggest drivers of both companies’ FCF
2013
-5 056
1. Common stock repurchased
2. Debt repayment3. Dividend paid
2010 2011 2012 2013 2014 2010 2011 2012 2013 20141461% 59% 100% 24% 112% 302% 11782% 63% 65% 54%
Comcast TWCDividends paid + Common Stock Repurchased as % of FCF
The money which was returned to shareholders
represented huge share of both companies’ FCF !
Overall:As Comcast has huge CAPEX ,its
Depn&Amort is also huge. Hovewer Comcast does not have enough cash to finance it, so it is taking out huge debt (but total
debt is decreasing!)
Overall:TWC’s CAPEX and Depn&Amort
are also huge, but since 2012 TWC has been repaying more debt than issuing. However its
debt to asset ratio is still enormous (86% in 2013). In
2014 its Operating inflow was high enough to cover financial
and investing outflows.
Revenues by segments in 2007-2013
% of C
able TV revenu
es in
Total Ren
eue
Drops are consistent with market trends, the cable TV industry has seen declines in video subscribers over the last several years (customer complaint about rising cable subscription prices what is caused by
rising programming costs)
second major component
In 2011 year the situations changed, revenues from NBCU, Comcast Content &Others grew significantly and were second main part of Comcast’s total revenues . It happened because in 2011 year Comcast acquired 51% of NBCUniversal Holdings and a 49% interest in the Comcast Content Business.
BUT.. revenues generated from Broadband still remained important
« STOP !!!»
second major component
Revenues from Broadband had nearly doubled from $6.4 billion in 2007 to $12
billion in 2013 and the segment accounted for close to 20% to the
company’s overall revenues.
Increased in Broadband’s revenues of COMCAST and TWC are consistent with
market trends, The increasing need for speed and connectivity
is driving broadband growth in the U.S
% of Broadband revenues in
Total Reneue
Comcast's revenues from other segments were less important in overall revenues , but they were growing constantly although the changes were not spectacular .
TWC's revenues from other segments were less important in overall revenues , but they were growing constantly although the changes were not spectacular .
Source: www.trefis.com
EBIDTA by segments in 2007-2013
second major component
% of total EB
IDTA gen
eretaed by
Cable TV
segm
ent in bo
th com
panies
was falling (like % of R
even
ue)
second major component Growth caused by the same reason as growth in revenues
Source: www.trefis.com
Free Cash Flows by segments in 2007-2013
In Comcast and TWC Cable TV segment generated the most of the company’s free cash flow in every year , however this percentage was falling year by year because both companies were increasing their capital expenditures .
Source: www.trefis.com
2011 2012 20130
4000
8000
5307 5714 6596
Total capital expenditures
2011-2013
2011 2012 2013280029003000310032003300
2937
30953198
Total capital ex-penditures
2011-2013
2 x
0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000
22,120
64,657
3,198
6,596
CAPEX in Total Revenue in 2013
Total Revenue CAPEX
Capital expenditures in 2011-2013
10% of sales
14,5% of sales
Category 2012 2013/2012 2013 2012 2013/2012 2013CF to Capex ratio* 1,818 59% 1,07 1,543 124% 1,910
Capex to sales ratio 9% 112% 10% 14,5% 100% 14,5%
Cash flow to Capex Ratio of TWC also increased from previous year so it might indicate that the TWC is in a position to grow and growth is generally what increases share price and shareholder wealth.
TWC takes the maintenance and
expansion of its capital infrastructure seriously.
Capital Expenditures 5 year Growth Rate
2010 2011 2012 2013 2014Gross PPE 28.217 30.920 33.272 35.619 38.552Acc depr. -14.344 -17.015 -18.530 -20.563 -22.562Net PPE 13.873 13.905 14.742 15.056 15.990
2010 2011 2012 2013 2014Gross PPE 56.020 64.087 66.657 72.414 76.363Acc depr. -32.505 -36.528 -39.425 -42.574 -45.410Net PPE 23.515 27.559 27.232 29.840 30.953
76363 38552
1/2
2013 2012 Change LIQUIDITY Current Ratio 0,74 1,20 worseQuick Ratio 0,74 1,20 worseTURNOVER Receivable Turnover 10,14 11,33 worseTotal Asset Turnover 0,41 0,38 betterPROFITABILITY Return on Sales 10,5% 9,9% betterReturn on Assets 4,3% 3,8% betterReturn on Equity 13,1% 9,3% betterGross Margin 69,6% 68,1% betterLEVERAGEDebt to Assets 67% 60% worseDebt to Equity 2,05 1,47 worseTIE (times) 5,32 5,60 worseEquity Multiplier 3,05 2,47 worseCASH MANAGEMENT (in days)Days Sales Outstanding 36 32 worseAccount Payable Days 101 96 betterCash Conversion Cycle -66 -64 betterMARKET VALUEEarnings Per Share 2,60 2,32 betterDividends per Share 0,78 0,65 betterDividend Yield 1,50% 1,74% constantDividend Payout 30,00% 28,02% betterPrice to Earnings 19,99 16,10 betterPrice to Book Value 2,69 2,03 betterMarket Capitalization $136 B $100 B better
Name of Ratio COMCAST
Individual Ratios in 2012-2013
40 % up
As concerned with the short term solvency of
Comcast, Current ratio of the company is deteriorated
significantly (38 %) from 2012 to 2013, its
below 1, it means that he company cannot pay its
current liabilities and should looked at this with extreme caution. Quick ratio is the same because Comcast does not have
inventory.
Debt to equity ratio of Comcast in 2012 was high and in 2013 increased strongly, about 40 % it is not a good indication, it represented that Comcast was focused on debt financing . As well as debt to asset ratio of Comcast's went up. Financial leverage based on its solvency ratios appears quite high. Debt exceeds equity by more than 2 times, while almost 70 % of assets have been financed by debt.
72 %f of non-current assets consists of intangible
assets (such as goodwill and
franchise rights and others)
As a result, In 2013 the ratio of debt to tangible assets –
calculated as Total Liabilities/Tangible assets– is 261 %, which means that all of tangible assets (plant and equipment, inventories, etc.)
have been financed by borrowing.
Growing Equity Multiplier and decreasing TIE ratios (probably due to increase in interest expenses due to the firm’s focus on debt financing) confirmed that Comcast was focusing on debt financing and had a high amount of leverage.
Generally Comcast had in both years high negative CCC, it is great case and it shows that the company has a big power in the industry.
Overall its profitability is good, all ratios increased.
Generally all ratios increased, market capitalization too, Comcast can be considered as a good investment.
2013 2012 Change LIQUIDITY Current Ratio 0,41 0,92 worseQuick Ratio 0,41 0,92 worseTURNOVER Receivable Turnover 23,19 24,22 worseTotal Asset Turnover 0,46 0,31 betterPROFITABILITY Return on Sales 8,8% 10,1% worseReturn on Assets 4,0% 4,3% worseReturn on Equity 28,1% 29,6% worseGross Margin 70,8% 71,3% worseLEVERAGEDebt to Assets 86% 85% worseDebt to Equity 5,95 5,84 worseTIE (times) 2,96 2,96 constantEquity Multiplier 6,95 6,84 worseCASH MANAGEMENT (in days)Days Sales Outstanding 16 15 worseAccount Payable Days 32 38 worseCash Conversion Cycle -16 -23 worseMARKET VALUEEarnings Per Share 6,76 6,97 worseDividends per Share 2,60 2,24 betterDividend Yield 1,92% 2,30% constantDividend Payout 38,46% 32,14% betterPrice to Earnings 20,04 13,94 betterPrice to Book Value 5,62 4,11 betterMarket Capitalization $39 B $30 B better
Name of Ratio TWC
Individual Ratios in 2012-2013
As concerned with the short term solvency of TWC, Current ratio of the company is declined substantialy (55 %) from 2012 to 2013, it is very low only 0,41, it indicates strong lack of liquidity and a risk of bankruptcy. Quick ratio is the same because TWC does not have inventory.
Debt to equity ratio of TWC’s in 2012 was very high and in 2013 increased slightly. It means that TWC was highly leveraged and represented a high risk for investors. Debt to asset ratio of TWC was also very high, TWC financed in 2013 86 % of it's assets with debt! It's a lot.
We have to note that 66 %f of non-current assets consists of intangible
assets (such as goodwill and
franchise rights and others)
As a result, the ratio of debt to tangible assets – calculated as Total Liabilities/Tangible
assets– is 2615%, which means that all of
tangible assets (plant and equipment,
inventories, etc.) have been financed by
borrowing!
Generally TWC had in both years also negative CCC, it's good, the company could invest cash received from customers before paying suppliers, however, the situations worsened in recent year.
Generally all ratios increased, except EPS.
EPS decreased but still was quite high because EPS for full year of 2013 benefited from lower average common shares outstanding as a result of share repurchases under the Company’s stock repurchase program.
Since inception of the share repurchase program in November 2010 through December 31, 2013, TWC has repurchased over 25% of its outstanding shares for $7.5 billion at an average price of $82.51 per share
Price to earnings rose strongly , the market was willing pay for TWC’s earnings- more. Each company would have to pay more to acquire TWC.
COMCAST TWC Comcast2013 2013 TWC
LIQUIDITY 2013Current Ratio 0,74 0,41 betterQuick Ratio 0,74 0,41 betterTURNOVER Receivable Turnover 10,14 23,19 worseTotal Asset Turnover 0,41 0,46 worsePROFITABILITY Return on Sales 10,5% 8,8% betterReturn on Assets 4,3% 4,0% betterReturn on Equity 13,1% 28,1% worseGross Margin 69,6% 70,8% worseLEVERAGEDebt to Assets 67% 86% betterDebt to Equity 2,05 5,95 betterTIE (times) 5,32 2,96 betterEquity Multiplier 3,05 6,95 betterCASH MANAGEMENT (in days)Days Sales Outstanding 35,50 15,53 worseAccount Payable Days 101,17 31,53 betterCash Conversion Cycle -65,67 -16,01 betterMARKET VALUEEarnings Per Share 2,60 6,76 worseDividends per Share 0,78 2,60 worseDividend Yield 2% 2% constantDividend Payout 30% 38% worsePrice to Earnings 19,99 20,04 worsePrice to Book Value 2,69 5,62 worseMarket Capitalization 136 421 39 024 worse
Name of Ratio Who is scoring a goal?
Comparative Ratios 2013
4 x
2x
2,6x
Current ratio of Comcast was below 1, it idicates a weaking liquidity position, but the situation is better than TWCs which had a strong lack of liquidity. Score for Comcast. Generally Comcast's all leverage ratios looked better than TWC, which is much more leverage , TWC used more debt to finance its assets, higher financial risk. Scores for Comcast again.
Comcast is scoring again. It had 4 times more days than TWC to invest it before it had to pay its suppliers. Comcast has a BIG market power in the industry.
Genarally, their profitability was quite similar, Comcast had slightly better ROS and ROA, but the main difference was in ROE. TWC had 2 times higher ROE. Why? Du Pont equitation will give the answer.
Generally, Comcast comparing to TWC looked worse, but have much more bigger market capitalization. TWC had 2,6 times bigger EPS and it was good quality EPS, because operating cash flow per share (operating cash flow divided by the number of shares used to calculate EPS) was 16,9 and it was greater than reported EPS Score for TWC.
Industry Comparison :Ratio data TTM as of 12/31/2014
www.bloomberg.com
Comcast has ROA below industry average while TWC higher than
industry averageComcast and TWC have Return on Capital higher than industry average.Comcast and TWC have Return on Eguity below industry average but TWC return on equity is much more
higer than Comcast's.
Current ratios are below industry average, both companies should improve their liquidity position.
Comcast below industry average, TWC higher level of leverage than
industry average. Comcast below industry average, TWC higher than industry average.
Industry Comparison :Ratio data TTM as of 12/31/2014
http://www.bloomberg.com
Revenues of both companies grew faster than industry market, but
Comcast's revenue increased faster.
Capital expenditures are below industry but TWC is investing more to make grower revenues in future.
Du Pont Equation
Du Pont analysis tells us that ROE is affected by three things:1)Financial leverage, which is measured by the equity multiplier (EM)2)Assets Efficiency which is measured by total asset turnover (TAT)3)Profitability, which is measured by profit margin( ROS)
Du Pont Equation (in $ Millions) 2013 2012 2013 2012
Net Income 6 816 6 203 1 954 2 155Sales 64 657 62 570 22 120 21 386Total Assets 158 813 164 971 48 273 49 809Owners Equity 50 694 49 356 6 943 7 279
EM=TA/OE 3,13 3,34 6,95 6,84TAT=Sales/TA 0,41 0,38 0,46 0,43ROS=NI/Sales 10,54% 9,91% 8,83% 10,08%ROE=EMxTATxROS 13,45% 12,57% 28,14% 29,61%
TWC Comcast
Du Pont Equation
2.3 x
2.1 x
ROS is the major component of ratio. It is also similar in 2013, although Comcasts was higher. In 2013 for every $100 of Sales, Comcast generated $10,54 of Net Income, and TWC generated $8,83 of Net Income.
TWC's ROE comparing to Comcast’s looked amazing but the key difference follows straight from leverage, TWC was 2,3 times more leverage. If a company is taking on way too much debt that is not good- increase in lease and debt financing leads towards an increase in interest expenses and reduced profits.
In 2013 for every $1 of Total Equity, Comcast owned $ 3.13 of Assets while TWC owned $6.95 of in Total Assets! Its 2,3 times more. Higher Ratio > the more debt is used to finance assets > Higher Risk !
In 2013 for every $1 of Assets, Comcast generated $0.41 in Revenue, and TWC generated $0.46 in Revenue.It's not a big difference, probably both companies had similar pricing strategy.
Change % Better/Worse Change % Better/WorseEM=TA/OE -6% better 2% worseTAT=Sales/TA 7% better 7% betterROS=NI/Sales 6% better -12% worseROE=EMxTATxROS 7% better -5% worse
100 % BETTER 25% BETTER/75% WORSELet's talk about ROE.
ROE component’s variation 2013/2012
Comcast’s ROE increased.Comcast improved its assets utilization and profitability of sales. It was good.
In 2013 TWC was leverage more but it did not lead to higher ROE because profit margin fell (12 %) and ROE declined too. It can cause some concern.
Leasing Expenditures
Year 1 Years 2-3 Years 4-5 More than 5 Total Year 1 Years 2-3 Years 4-5 More than 5 Total Capital lease obligations 7 11 5 14 37 49Operating lease obligations 385 628 458 673 2 144 149 272 191 300 912Total contractual obligations 15 773 18 794 16 796 55 679 107 042 9 089 13 518 13 980 47 551 84 138
Contractual obligations outstanding as of December 31, 2013 by the period in which the payments are due
no data in the notes
COMCAST TWC(in $ Millions)
Capital lease obligations Operating lease obl.Total contractual obl.
372 144
107 042
49912
84 138
Similar structure of Operating leases – operating leases due by more than 5 years
have the biggest share
COMCAST TWC
Total Capital lease obligations as % of Total contractual obligations 0,03% 0,06%Total Operating lease obligations as % of Total contractual obligations 2,00% 1,08%Total lease obligations as % of Total contractual obligations 2,04% 1,14%
Lease obligations as % of Contractual obligationsObligations outstanding as of December 31, 2013
0,03%2,00%2,04%
0,06%1,08%1,14%
Overall, Comcast finances more of its operations with leasing than TWC. Both companies prefer operating than capital leasing. TWC uses Capital leasing more often than Comcast.
X2,35
X1,27
X0,75Comcast has much more operating leases, but less capital leases than TWC!
Advertising Expenditures
Industry *(in $ millions) 2011 2012 2013 2012/2011 2013/2012 2011 2012 2013 2012/2011 2013/2012 2013Advertising Expenditures 4231 4831 4969 14% 3% 635 653 676 2,8% 3,5% 5,3%Advertising as a % of Sales 8% 8% 3% 3% 1,9%Advertising as a % ofMargin 11% 12% 3% 4% 4,6%
COMCAST TWC 5 % more
Both companies spend much more than industry average percentage
Research&Development Expenditures
99%
1%
R&D employees in 2013
Total number of employees R&B employess
61 %
39 %
R&D employees in 2013
Total number of employees R&B employess
(in $ millions) 2005 2006 2007 2008 2009 2010 2011 2012 2013 2005 2006 2007 2008 2009 2010 2011 2012 2013R& D Expenditures 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
BUY TWC!!
Comcast's and TWC's investments in R&D have been almost invisible. Neither company spent enough on it lasts years to even disclose the figure in its annual reports
Comcast doesn't want to make that sort of investment in innovation as GOOGLE!!!
Segments Sales ∆ in $M ROS ∆ in $ M TOTAL in $ M Sales ∆/Total ROS ∆/Total SALES V% ROS V%
Cable comunication 577 384 961 60% 40% 5,64% 0,97%Cable Network 143 56 199 72% 28% 5,43% 0,65%Broadcast Television -37 23 -14 268% -168% -13,17% 0,29%Filmed Entertainment 25 380 405 6% 94% 5,68% 7,36%Theme Parks 652 -28 623 105% -5% 7,19% -1,35%Total 471 1099 1570 30% 70% 3,24% 1,72%
(Revenue in the 2nd year – Revenue in the 1st year) x (operating margin from 1sr year/ revenue from the 1st year)
ROS V% x Revenue in the 1st year
($41836-$39604) x ($10811/$41836)
(25,8%-24,9%) x ($39604)
Segments Sales ∆ in $M ROS ∆ in $ M TOTAL in $ M Sales ∆/Total ROS ∆/Total SALES V% ROS V%Cable comunication 152 -17 135 113% -13% 3,43% -0,1%
x7
SALES MIX – Cable Communication
ROS increased only by 0,97%, but its $ impact was
huge!
SALES MIX – Cable Communication
DOL, DFL and DTL
4,5% of sales
Formulas:
DOL-0,94 -2,07
DFL -3,87 0,42
DTL 3,62 -0,88
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STRONG BUYBUYHOLDSELLSTRONG SELL
11 x 1 = 1111 x 2 = 224 x 3 = 120 x 4 = 00 x 5 = 0
26 45
Current Price: $57,94
45/26 = 1,73
11 x 1 = 1111 x 2 = 223 x 3 = 90 x 4 = 00 x 5 = 0
25 42
Three-Month-Ago Price: $52,91
42/25 = 1,68
STRONG BUYBUYHOLDSELLSTRONG SELL
4 x 1 = 46 x 2 = 1212 x 3 = 361 x 4 = 40 x 5 = 0
23 56
Current Price: $154,81
56/23 = 2,43
4 x 1 = 45 x 2 = 1012 x 3 = 360 x 4 = 00 x 5 = 0
21 50
Three-Month-Ago Price: $153,27
50/21 = 2,38
P/E RATIO
Current Price $57,94
P/E 18,11
P/E Forward 15,79
EPS 2014 = 3,20
EPS 2015 = 3,67
G% = 14,6%
Current Price $154,81
P/E 21,59
P/E Forward 17,47
EPS 2014 = 7,17
EPS 2015 = 8,86G% = 24%
What will happen to the stock price next year?
Actual Price: $57,94 Actual Price: $154,81
Median Target $66,00 $173,00
High Target $72,00 $198,00
Low target $59,00 $135,00
13,9%
24,3%3,5%
11,7%
27,9%(12,8%)
Price is expected to rise by 13,9% and the worst scenario expected is an increase of
3,5% so the expectations are good
Worst expectations than those of CC. Price is expected to rise by 11,7% and the worst scenario expected is a decrease of
12,8%.
CORRELATION COEFFICIENT
Time Warner Cable 0,4080
DIRECTV 0,7730
TWX 0,8710
Disney 0,9248
S&P 0,9599
Very little correlation. This is because TWC prices are ‘artificially’ set because of the merger. Comcast sets the prices.
High correlation. Comcast prices move along with the rest of the market.
Altman Z-score
Z = 1.2T1 + 1.4T2 + 3.3T3 + 0.6T4 + 0.999T5T1 = Net Working Capital / Total AssetsT2 = Retained Earnings / Total AssetsT3 = Earnings Before Interest and Taxes / Total AssetsT4 = Market Capitalization / Total LiabilitiesT5 = Sales/ Total Assets
Zones of Discrimination:Z > 2.6 -“Safe” Zones1.11 < Z < 2.6-“Grey” ZonesZ < 1.1 -“Distress” Zones
Altman Z-score
(in $ Millions) 2013 2012 2013 2012Net Working Capital -4837 3277 -3082 -448Total Assets 158 813 164 971 48 273 49 809Retained Earnings 19 235 16 280 -55 363EBIT 13 689 14 130 4 591 4 942Market Capitalization 136 421 100 050 39 024 29 935Total Liabilities 106 798 98 177 41 326 42 526Sales 64 657 62 570 22 120 21 386Z-score 1,59 1,43 1,26 1,18
7 % 11%
Components:
2013 2012 2013 2012
Z-score in 2013 year while
only one factor changed
%Change of Z-score caused by one
component while others are unchanged
Z-score in 2013 year while
only one factor changed
%Change of Z-score caused by one
component while others are unchanged
Net Working Capital / Total Assets -0,030 0,020 -0,064 -0,010 1,2 1,37 -4,2% 1,11 -5,7%Retained Earnings / Total Assets 0,121 0,099 -0,001 0,007 1,4 1,47 2,2% 1,17 -0,6%EBIT / Total Assets 0,086 0,086 0,095 0,099 3,3 1,44 0,1% 1,16 -1,4%Market Capitalization / Total Liabilities 1,277 1,019 0,944 0,704 0,6 1,59 10,8% 1,32 12,2%Sales/ Total Assets 0,407 0,379 0,458 0,429 0,999 1,46 1,9% 1,21 2,8%Z-score 1,59 1,43 1,26 1,18
COMCAST's Z-score drivers TWC's Z-score driversComcast TWC
Weight of components:
Altman Z-score: Components Analysis
V% V%Net Working Capital -248% 588%Total Assets -4% -3%Retained Earnings 18% -115%EBIT -3% -7%Market Capitalization 36% 30%Total Liabilities 9% -3%Sales 3% 3%
Market price per share went up 39,1 %
Market price per share went up 39,4 %
Main Driver
« The lowest weight but the stronger influance on
Z-score while other componensts are unchanged»
Market price per share
Net liquidation per share LV/MV
2013 51,97 -5 -9%2012 37,36 0,85 2%
2013 2012(in $ Millions) Coefficient Balance Sheet Bankruptcy Balance Sheet Bankruptcy Coefficient Balance Sheet Bankruptcy Balance Sheet Bankruptcy Cash And Equivalents 1 1 718 1 718 10 951 10 951 1 525 525 3 304 3 304Short-Term Investments 0,9 3 573 3 216 1 464 1 318 0,9 0 0 150 135Accounts Receivable 0,75 6 376 4 782 5 521 4 141 0,75 954 716 883 662Other Current Assets 0,7 2 408 1 686 2 055 1 439 0,7 665 466 540 378PROPERTY PLANT AND EQUIPMENT, NET 0,8 29 840 23 872 27 232 21 786 0,8 14 255 11 404 14 004 11 203Goodwill 0 27 098 0 26 985 0 0 3 196 0 2 889 0Other Assets 0,5 11 107 5 554 13 559 6 780 0,5 1 313 657 649 325Other Intangibles 0,7 76 693 53 685 77 204 54 043 0,7 27 365 19 156 27 390 19 173TOTAL ASSETS 158 813 94 512 164 971 100 456 48 273 32 922 49 809 35 180Current Liabilities 1 18 912 18 912 16 714 16 714 1 5 226 5 226 5 325 5 325Net Cash 139 901 75 600 148 257 83 742 43 047 27 696 44 484 29 855Long-term liabilities 1 87 886 87 886 81 463 81 463 1 36 100 36 100 37 201 36 100Liquidation Value 52 015 -12 286 66 794 2 279 6 947 -8 404 7 283 -6 245Common Shares Outsatnding 2 625 2 625 2 678 2 678 288 288 308 308Net liquidation per share ($) 20 -5 24,94 0,85 24 -29 24 -20
2012 2013
Bankruptcy: Liquidation Value Analysis
The liquidation value of a firm is negative, he firm's debt exceeds the market value of assets
The liquidation value of a firm is negative, he firm's debt exceeds the market value of assets
Market price per share
Net liquidation per share LV/MV
2 013 136 -29 -22%2 012 97 -20 -21%
Weighted average cost of capital
Z =E/(E+D)*Cost of equity+D/(E+D)*Cost of Debt*(1-Tax Rate)
WACC 7.64 % 7.45%ROI 10.86% 9.22%
Comcast Corp's weighted average cost Of capital is 7.64%. Comcast
Corp's return on invested capital is 10.86%. Comcast Corp generates higher
returns on investment than it costs the company to raise the capital needed for that investment. It is earning excess returns. A firm that
expects to continue generating positive excess returns on new investments in the future will see its value increase as growth
increases.
Time Warner Cable Inc's weighted average cost Of capital is 7.45%. Time
Warner Cable Inc's return on invested capital is 9.22%. Time Warner Cable Inc
generates higher returns on investment than it costs the company to raise the capital needed for that investment. It is earning excess returns.
A firm that expects to continue generating positive
excess returns on new investments in the future
will see its value increase as growth increases.
Generally it t costs more COMCAST than TWC to raise the capital needed for the investment
What is happening in MEDIA industry now?
HOT RUMORS: Apple Collects 15% of Revenue Generated From HBO NOW and Other Apple TV AppsHOT NEWS: Comcast Says It’s Not Talking to Apple About Apple TV, Because Apple Hasn’t AskedHOT NEWS: Watch Out, Comcast: Apple May Soon Launch a Live TV ServiceApple TV isn't a worry for Comcast -yet
Comcast-TWC Merger Called Off
Comcast announced on the 23rd April that its merger agreement with Time Warner Cable and its related transactions agreement with Charter Communications, Inc. have been terminated. The merger, which would have made the combined entity the largest pay-TV operator in the U.S., had garnered a lot of negative attention since it was announced in February of 2014.
FCC Chairman Tom Wheeler issued a statement on the latest developments, which made it clear why he was opposed to the merger. It was the potential power that the combined entity would have yielded in the high speed internet market that worried him the most.
