Following the second quarter 2012 earnings announcement on August 8, most of the analysts covering DISH Network Corp. (DISH) have reduced their estimates. The brokers have reduced their estimates based on the ongoing programming fees and litigation issues with AMC Networks Inc. (AMCX).
Moreover, the analysts remained bearish in their view as the company suffered a major blow owing to the FCC’s delayed decision to grant the company a waiver to establish wireless broadband network.
Second Quarter Highlights
On a GAAP basis, quarterly 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. Adjusted EPS of 59 cents were well below the Zacks Consensus Estimate of 63 cents.
Quarterly total revenue of $3,571.8 million was down 0.5% year over year, and also below the Zacks Consensus Estimate of $3,650 million. Quarterly EBITDA was around $760.2 million compared with $935 million in the year-ago quarter.
Agreement of Analysts
Of the 15 analysts covering the stock in the last 7 days, none of the analysts have revised their estimate for the third and fourth quarter of 2012. Over the past 30 days, 10 out of 15 analysts covering the stock have downgraded their estimates while two have revised their estimates upward for the third quarter of 2012.
Similarly, for the fourth quarter of 2012, nine out of the 15 analysts have reduced their estimates while three have moved in the opposite directions.
For 2012, out of the13 analysts covering the stock in the last 7 days, none of the analysts have revised their estimates. Likewise, for 2013, out of the 15 analysts covering the stock in the last 7 days, none of the analysts have revised their estimates.
In the last 30 days of 2012, 12 out of the 13 analysts covering the stock have reduced their estimates with no upward revisions. For 2013, out of the 15 analysts covering the stock, nine have increased their estimates while three have moved in the opposite direction.
Currently, the Zacks Consensus Estimates for the third and fourth quarter of 2012 are pegged at 56 cents per share respectively, with projected annual growth of (21.78%) and (20.67%), respectively.
Magnitude of Estimate Revisions
During the last 7 days, the current Zacks Consensus Estimates for the third and fourth quarter of 2012 are in line with the Zacks Consensus Estimate of 56 cents. During the last 30 days, the current Zacks Consensus Estimates for the third and fourth quarter of 2012 is 7 cents below the earlier estimate of 63 cents.
For 2012, the current Zacks Consensus Estimate is in line with the prior estimate of $2.45, while for 2013 the current Zacks Consensus Estimate is in line with the prior estimate of $2.51 in the last 7 days. However, the Zacks Consensus Estimate for 2012 is 28 cents below the earlier estimate of $2.73 in the last 30 days. For 2013, the current Zacks Consensus Estimate is 26 cents below the earlier estimate of $2.77.
Earnings Surprises
The company has outdone the Zacks Consensus Estimates in two out of the four previous quarters. In the second quarter of 2012, DISH Network underperformed the estimate by 7 cents or (10.61%).
The estimates for the ongoing and fourth quarter of 2012 contain a downside risk (essentially a proxy for future earnings surprises) of 1.79% respectively. The estimate for 2012 remains at breakeven while the estimate for 2013 contains a downside risk of 0.40%.
Our Recommendation
DISH Network is transforming itself from a low-priced leader in the U.S. pay-TV industry to a premium service provider to reduce its subscribers’ churn rate. Based on lower churn rate the company significantly reduced its net subscriber loss. The new movie streaming services that DISH Network started after its acquisition of Blockbuster movie chain, better overall pay-TV services, and increased customer loyalty helped the company to reduce its churn rate.
However, the company faces stiff competition from DIRECTV (DTV) and other cable TV operators. Furthermore, Telecom operators are quickly gaining market share from cable TV and satellite TV service providers by offering fiber-based TV and other high-speed broadband services to subscribers thus posing a threat to DISH Network.
We maintain our long-term Neutral recommendation on DISH Network Corp. Currently, DISH has a Zacks #3 Rank, implying a short-term Hold rating on the stock.
About Earnings Estimate Scorecard
As a PhD from MIT, Len Zacks proved over 30 years ago that earnings estimate revisions are the most powerful force impacting stock prices. He turned this ground breaking discovery into two of the most celebrating stock rating systems in use today. The Zacks Rank for stock trading in a 1 to 3 month time horizon and the Zacks Recommendation for long-term investing (6+ months). These “Earnings Estimate Scorecard” articles help analyze the important aspects of estimate revisions for each stock after their quarterly earnings announcements. Learn more about earnings estimates and our proven stock ratings at: http://www.zacks.com/education/
AMC NETWORKS- A (AMCX): Free Stock Analysis Report
DISH NETWORK CP (DISH): Free Stock Analysis Report
DIRECTV (DTV): Free Stock Analysis Report
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