Is a Beat in Store for DISH Network (DISH) in Q3 Earnings?

DISH Network Corp. DISH is slated to report third-quarter 2017 financial numbers on Nov 9, before the opening bell.

The company has a mixed earnings surprise history. The company’s earnings surpassed the Zacks Consensus Estimate in two of the previous four quarters and missed the same in the remaining two quarters, with an average beat of 0.76%.

Let’s see how things are shaping up for this announcement.

Why Do We Expect a Positive Surprise?

Our proven model shows that DISH Networkis likely to beat estimates because it has the right combination of the two key elements.

Zacks ESP: DISH Networkhas an Earnings ESP of +1.68%. This is because the Most Accurate estimate is at 61 cents, while the Zacks Consensus Estimate is pegged at 60 cents. This is a meaningful indicator of a likely positive earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: DISH Network currentlyhas a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating estimates. Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.

The combination of the company’s favorableZacks Rank and positive ESP makes us confident of an earnings beat.

What is Driving the Better-Than-Expected Earnings?

DISH Network has created an extensive portfolio of wireless spectrum worth $50 billion. We are impressed with the company’s efforts to diversify its business model from a pure-play satellite-TV operator to an Internet-TV operator. This should aid the company to counter competitive threats from low-cost video streaming operators. The launch of Air TV Player bodes well for DISH Network’s prospects.

Moreover, DISH Network has been trying to lure customers for its Internet-TV service, Sling TV, by offering services at a reasonable rate along with the addition of other premium networks such as Showtime. Despite such efforts, the company has failed to gain subscribers in the broadband and pay-TV segment.

In second-quarter 2017, DISH Network lost 196,000 pay-TV subscribers compared with a loss of 281,000 in the year-ago quarter. Moreover, the company lost 46,000 broadband subscribers in the reported quarter compared with a loss of 15,000 in the prior-year quarter. This trajectory of subscriber losses in pay TV continues to signify an unprecedented annual decline. DISH Network continues to struggle with the persistent loss of subscribers due to cord cutting. Notably, online video streaming providers such as Netflix Inc (NFLX), Hulu.com, YouTube etc., have become a severe threat to cable-TV operators because of their extremely cheap source of TV programming.

DISH Network witnesses intense competition in the pay-tv market from players like AT&T Inc, Comcast Corp CMCSA and Charter Communications Inc CHTR. The company received a penalty of $280 million in a telemarketing lawsuit, which is a woe. Also, escalating programming and content expenses and retransmission fees may impede the company’s margins. In second-quarter 2017, DISH Network’s performance in certain metrics was disappointing. We hope that the company will recover from the downturns in the to-be-reported quarter.

Due to such headwinds, the company’s shares have lost 20.0% compared with the industry’s decline of 10.7%.

A Closer View of Subscriber Statistics

In third-quarter 2017, DISH Network expects to lose 127,000 pay-TV subscribers compared with a loss of 196,000 subscribers reported in the year-ago period. As of Sep 30, 2017, DISH Network’s pay-TV subscriber base totaled 13.209 million, down from 13.332 million in the previous quarter.

Moreover, DISH Network anticipates a loss of 38,950 broadband subscribers in the to-be-reported quarter compared with a loss of 46,000 broadband subscribers in the previous quarter. As of Sep 30, the company’s broadband subscriber base is projected at 470,000, down from 509,000 broadband subscribers in second-quarter 2017. Pay-TV average subscriber acquisition cost is pegged at $606 compared with $690 in second-quarter 2017.

Key Pick

Here is a company from the broader Consumer Discretionary sector — which houses DISH Network— that has the right combination of elements to post an earnings beat this quarter.

Sirius XM Holdings Inc SIRI is expected to release fourth-quarter 2017 results on Jan 2. The company has an Earnings ESP of +1.61% and carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

The company’s earnings beat the Zacks Consensus Estimate in one of the previous four quarters, with an average of 12.50%.

Wall Street’s Next Amazon

Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.

Click for details >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

To read this article on Zacks.com click here.

Zacks Investment Research