Comcast Stock Plunges on Guidance Revision

Time Warner Cable, Cablevision Systems Shares Down, Too
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Comcast shares plunged Wednesday morning after the company revised its outlook for its financial performance in 2007.

The nation’s largest cable operator said that as a result of a “challenging economic and competitive environment,” revenue-generating-unit growth for 2007 is forecasted to be 6 million units versus a previously forecasted 6.5 million, bringing the total number of RGUs to 57 million.

As a result, cable-revenue growth for 2007 will be 11%, down from the previous guidance of at least 12%, while cable operating-cash-flow growth will be approximately 13% versus at least 14% previously. The company’s consolidated-operating-cash-flow growth is now expected to be about 13% for the year compared with previous guidance that suggested growth of at least 13%.

Additionally, Comcast expects capital expenditures to be $6 billion in 2007, 5% higher than the company previous forecast. In a statement, the company attributed the rise to “increased advanced digital set-top-box purchases, the company’s digital-acceleration program, expanded network enhancements and acquisition-related investments.”

Consolidated free cash flow is projected to be 80% of the 2006 level, lower than the previous guidance of 90%.

Commenting on the revisions, Comcast co-chief financial officer Michael Angelakis said the company was very bullish on its momentum coming into the year. However, since the beginning of the third quarter, “We’ve seen a real softness in the business related to a combination of macroeconomic issues in markets and competitive intensity.”

Shares of Comcast plunged through its 52-week low on the news and were down more than 10% in late-morning trading. The stock had been improving in recent sessions on the Federal Communications Commission’s failed bid to prove that cable breached the 70/70 threshold and the company’s announcement that it was not participating in January’s auction of wireless spectrum. The stock hit a high of $21.62 per share Monday but hit a low of $18.35 Wednesday morning.

Other cable stocks were also suffering Wednesday morning. Time Warner Cable was down over 6% through midday after hitting a session low of $25.31 per share, while Cablevision Systems was down more than 5.5% and hit a 52-week low of $25 earlier in the day.