"Cash is the lifeblood of any business," says Roger Conrad. "And few companies have the robust vital signs of Comcast Corp. (NASDAQ: CMCSK), which the editor of The Utility Forecaster calls "America's cable king."
The advisor was particularly impressed with the firm's third quarter results, noting that its "historically robust growth rates" have accelerated even further, with revenue surging 22%, cash flow 25% and operating income 46%.
With the acquisition of assets from a bankrupt Adelphia this year, Conrad notes, the firm has expanded its basic cable customer rolls to 24 million and its network reach to more than 40 million homes. That expanded base, he predicts, will set the stage for more upselling to broadband Internet, telephone, and digital cable service (now more than 50% of the overall base).
He says, "Many see communications as a life-and-death struggle between telecom and cable giants." On the contrary, he notes, the "robust" performance of Comcast "paints the picture of an increasingly profitable industry."
With its rising cash flow stream and its "first meaningful earnings" of 58 cents per share in the latest quarter, the advisor rates Comcast a buy up to $40.
For those seeking income, he points out that the stock doesn't pay a dividend. But there is another option; Conrad recommends the Comcast 5.85% Notes of 01/15/10, which have a yield to maturity of 5.3%.
He sees little interest rate risk i the issue and the possibility of capital gains "as the company's credit rating is increased in coming years."