Mixed 3Q at DIRECTV - Analyst Blog
November 06 2012 - 7:45AM
Zacks
The largest U.S satellite TV
operator DIRECTV (DTV) has posted mixed
second-quarter 2012 results, where the bottom line missed the Zacks
Consensus Estimate but the top line surpassed the same.
Total revenue in the reported
quarter came in at $7,416 million, up 8.4% year over year, and
slightly ahead of the Zacks Consensus Estimate of $7,407 million.
Such impressive growth in revenue was mainly attributable to huge
subscriber growth in Latin American region. Quarterly GAAP net
income was $565 million or 90 cents per share compared with $516
million or 70 cents per share in the year-ago quarter. Quarterly
earnings per share of 90 cents fell short of the Zacks Consensus
Estimate of 92 cents. Quarterly operating profit before
depreciation & amortization (OPBDA) was $1,686 million, up 6.4%
year over year. Moreover, operating profit in the reported quarter
stood at $1,068 million, up 3.7% year over year.
At the end of the first nine months
of 2012, DIRECTV generated $4,133 million of cash from operations
compared with $3,611 million in the prior-year quarter. Free cash
flow (cash flow from operations less capital expenditures) was $319
million in the reported quarter compared with $235 million in the
year-ago quarter. At the end of the third quarter of 2012, DIRECTV
had $2,421 million in cash & cash equivalents and $17,162
million of outstanding debt on its balance sheet compared with $873
million in cash & cash equivalents and $13,464 million of
outstanding debt at the end of 2011.
DIRECTV U.S.
Segment
Revenue from this segment was
$5,769 million, up 6.4% year over year on the back of strong
subscriber base and significant ARPU growth. Quarterly ARPU was
$96.4 against $92.2 in the year-ago quarter. Growth in ARPU was
mainly fueled by price increases on programming packages and leased
boxes and higher advanced service fees. Quarterly operating profit
before depreciation & amortization rose 8.5% to $1,251 million
primarily buoyed by reduced subscriber acquisition cost.
Quarterly operating profit climbed 9.5% to $876 million.
Average monthly subscriber churn
rate in the reported quarter was 1.74% compared with 1.62% in the
prior-year quarter. Quarterly net subscriber growth was 67,000
compared with 327,000 subscriber additions in the year-ago quarter.
As of September 30, 2012, DIRECTV U.S. had 19.981 million
subscribers, up 1.1% on an annualized basis.
DIRECTV Latin America
Segment
This egment generated revenue of
$1,577 million, up 16.3% year over year, on account of massive
subscriber growth, which was on the flip side dampened by
reduced ARPU growth. Quarterly ARPU was $55.9 against $64.6 in the
prior-year quarter, primarily driven by foreign currency
fluctuation. Quarterly operating profit before depreciation &
amortization increased 4.8% to $455 million and operating profit
fell 6.4% to $221 million.
Average monthly subscriber churn
rate in the reported quarter was 1.91% compared with 1.83% in the
prior-year quarter. Quarterly net subscriber addition was 543,000
compared with 574,000 in the year-ago quarter. As of September 30,
2012, DIRECTV Latin America had approximately 9.666 million
subscribers, showing an annualized surge of 32.8%.
Recommendation
Strong fundamentals along with huge
subscriber growth across all its segments make it quite popular
within the pay-TV industry. Moreover, moving ahead settlement of
service renewal fees with Viacom, Inc. (VIAB) may
act as a tailwind for the company.
Nevertheless, stiff competition
from other pay TV providers coupled with sluggish economic growth
are envisioned to act as headwinds for the company in future.
Accordingly, we maintain our long-term Neutral recommendation on
DIRECTV.
Currently, DIRECTV has a Zacks #3
Rank, implying a short-term Hold rating on the stock.
DIRECTV (DTV): Free Stock Analysis Report
VIACOM INC-B (VIAB): Free Stock Analysis Report
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