DISH Network Underperforms - Analyst Blog
August 08 2012 - 6:30AM
Zacks
DISH Network Corp.
(DISH) declared weak financial results for the second quarter of
2012 way behind the Zacks Consensus Estimates. Nevertheless,
despite facing stiff competition from DIRECTV
(DTV) and other cable TV and telecom operators, in the previous
quarter, DISH Network lost a net total of 10,000 subscribers
compared with a huge net loss of 135,000 subscribers in the
year-ago quarter. At the end of the second quarter of 2012, DISH
Network had approximately 14.061 million subscribers.
Quarterly GAAP net income was $225.7
million or 50 cents per share compared with $334.8 million or 75
cents per share in the year-ago quarter. Second-quarter 2012
earnings per share of 50 cents were significantly below the Zacks
Consensus Estimate of 63 cents.
Quarterly total revenue was
approximately $3,571.8 million, down 0.5% year over year and also
below the Zacks Consensus Estimate of $3,650 million. This poor
performance was mainly due to weak Subscriber-related revenue.
Segment wise, quarterly Subscriber
related revenue was $3,295.8 million, down 0.5% year over year.
Equipment and merchandise sales & other revenue were $270.3
million, remaining same year over year. Equipment sales, services,
and other revenues from EchoStar were $5.7 million, down 35.5% year
over year.
Average monthly subscriber churn
rate in the second quarter of 2012 was 1.60% compared with 1.67% in
the prior-year quarter. Average revenue per user in the reported
quarter was $78.11 compared with $78.06 in the year-ago quarter.
Average subscriber acquisition cost in the previous quarter was
$806 compared with $795 in the year-ago quarter.
In the reported quarter,
Subscriber-related expenses crept up 5.6% year over year to
$1,825.8 million, driven by higher programming content costs and
expenses related to call center operations. Subscriber acquisition
cost increased 18% year over year to $404.5 million. Depreciation
and amortization expenses were $299.1 million, up 26.2% year over
year.
General and administrative expenses
grew 0.7% year over year to $327.7 million on higher personnel
costs and professional fees to support the network. Second-quarter
2012 operating income decreased by 34.8% to $468.4 million, while
operating margin reduced to 13.1% from the year-ago level of 20%.
Accordingly, quarterly EBITDA was around $760.2 million compared
with $935 million in the year-ago quarter.
During the first half of 2012, DISH
Network generated $1,348.1 million of cash from operations compared
with $1,258.3 million in the prior-year period. Free cash flow
(cash flow from operations less capital expenditures) in the first
half of 2012 was $927.9 million compared with $855.6 million in the
year-ago period.
At the end of the second
quarter of 2012, DISH Network had $4,945.7 million of cash and
marketable securities and $9,399.5 million of outstanding debt on
its balance sheet compared with $2,040.9 million of cash and
marketable securities and $7,493.8 million of outstanding debt on
its balance sheet at the end of 2011.
Recommendation
We maintain our long-term Neutral
recommendation on DISH Network. Currently, it has a short-term
Zacks #3 Rank (Hold) on the stock.
DISH NETWORK CP (DISH): Free Stock Analysis Report
DIRECTV (DTV): Free Stock Analysis Report
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