DIRECTV Continues Upward Movement - Analyst Blog
August 04 2011 - 12:54PM
Zacks
DIRECTV (DTV), the largest satellite TV
operator of the U.S., declared excellent second quarter 2011
financial results before the opening bell today. The solid result
was the combined effect of a double-digit revenue growth,
significant margin expansion, and better-than-expected net customer
addition.
Management’s strategy to target high-end customers paid-off well
as the demand for the company’s HD channels and digital-video
recording services sky rocketed in the reported quarter.
During the reported quarter, DIRECTV spend $1.51 billion to
repurchase its own shares. Management is also confident that the
company’s full-year EPS will jump to $5.0 in 2013 from $2.3 in
2010.
Second-quarter 2011 total revenue came in at $6,600 million, an
improvement of 13% year over year, surpassing the Zacks Consensus
Estimate of $6,539 million. This was primarily attributable to
massive subscriber growth in Latin American regions, solid average
monthly revenue per subscriber growth, and increasing contribution
from the U.S.
Quarterly GAAP net income was $701 million or 91 cents per share
compared with a net income of $543 million or 42 cents per share in
the year-ago quarter. Second-quarter 2011 adjusted (excluding
one-time gains) EPS of 88 cents easily surpassed the Zacks
Consensus Estimate of 85 cents.
Quarterly operating profit before depreciation &
amortization (OPBDA) was $1,846 million, up 12.9% year over year.
Operating profit in the second quarter of 2011 came in at $1,230
million, up 21.8% year over year, primarily due to gross profit
associated with higher revenues, partially offset by an increase in
subscriber acquisition costs.
During the first half of 2011, DIRECTV generated $2,404 million
of cash from operations compared with $2,494 million in the
prior-year period. Free cash flow (cash flow from operations less
capital expenditures) in the reported period was $1,108 million
compared with $1,483 million in the year-ago quarter.
At the end of the second quarter of 2011, DIRECTV had $2,528
million of cash & cash equivalents and $13,462 million of
outstanding debt on its balance sheet compared with $1,502 million
of cash & cash equivalents and $10,510 million of outstanding
debt at the end of fiscal 2010.
DIRECTV U.S. Segment
Quarterly total revenue was $5,277 million, up 7% year over
year, primarily due to strong ARPU growth and larger subscriber
base. Quarterly ARPU increased 3% to $90.58. Quarterly operating
profit before depreciation & amortization inched up 4% to
$1,446 million and operating profit climbed 13% to $1,016
million.
Average monthly subscriber churn rate in the reported quarter
was 1.59% compared with 1.51% in the prior-year quarter. Quarterly
net subscriber addition was 26,000 compared with 100,000 in the
year-ago quarter. As of June 30, 2011, DIRECTV U.S. had 19.433
million subscribers, up 4% year over year.
DIRECTV Latin America Segment
Quarterly total revenue was $1,254 million, up 46% year over
year,resulting from continued strong subscriber growth including a
significant increase of 14% in second- quarter net subscriber
additions of 472,000. Quarterly ARPU increased 13.3% to $64.56due
to price increase and higher sales of HD and DVR services.
Quarterly operating profit before depreciation & amortization
increased 60% to $423 million and operating profit jumped 72% to
$241 million.
Average monthly subscriber churn rate in the reported quarter
was 1.81% compared with 1.63% in the prior-year quarter. As of June
30, 2011, DIRECTV Latin America had approximately 6.707 million
subscribers, up 28.4% year over year.
Recommendation
We maintain our long-term Neutral recommendation on DIRECTV.
Currently, it holds a short-term Zacks #3 Rank (Hold) on the
stock.Within the satellite TV industry, DIRECTV is facing
competition from its nearest rival DISH Network
Corp. (DISH). Moreover, the U.S. telecom giants,
AT&T (T) and Verizon Wireless
(VZ) are increasingly rolling out their fiber-based network in
order to provide video services.
DISH NETWORK CP (DISH): Free Stock Analysis Report
DIRECTV (DTV): Free Stock Analysis Report
AT&T INC (T): Free Stock Analysis Report
VERIZON COMM (VZ): Free Stock Analysis Report
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