Entertainment technology provider
DTS Inc. (
DTSI
)
is scheduled to announce its fourth quarter 2011 results after the
market closes today. We expect the company to earn 40 cents per
share in this quarter based on an estimated 8.0% year-over-year
growth in revenue to $29.0 million.
Prior-Quarter Recap
DTS posted lackluster third quarter results, which missed the
Zacks Consensus Estimate on both the top and bottom lines. DTS
reported third quarter 2011 earnings (excluding amortization but
including stock-based compensation) of 15 cents per share, below
the Zacks Consensus Estimate of 18 cents. Most significantly,
reported earnings declined 16.7% on a year-over-year basis.
Revenues of $20.5 million for the reported quarter not only
plunged 2.4% on a year-over-year basis, but also lagged the Zacks
Consensus Estimate of $22.0 million. The miss was primarily
attributed to weakness in the auto and AV revenues segment arising
from the negative impacts of the Japan earthquake, which hampered
production. Although DTS did not provide any guidance for the
fourth quarter, the company expects results to be driven by
continued strength in Blu-ray and network-connected markets and
expects a rebound in the game console and automotive markets.
For further details please see
DTS Inc. Reports Lackluster 3Q
.
Estimate Revision Trend
In the run-up to the earnings report, we witness no major
variation in consensus estimates. Given no changes in the Zacks
Consensus Estimate for the fourth quarter of 2011 over the last 30
days, the analysts appear to be confident about their
expectations.
We note that on an average, DTS has posted an earnings surprise
of 11.29% in the trailing four quarters, implying that it has
outdone the Zacks Consensus Estimate by the same magnitude over the
period. We do not expect a major change in the earnings surprise
trend for the current quarter.
Our Recommendation
We believe that DTS will continue to gain market share riding on
its strong product portfolio, increasing online availability and
accelerated expansion of the DTS technology into new markets, such
as smartphones, portable devices and digital media players.
We remain optimistic about DTS due to its global presence,
particularly in the emerging markets of the Asia-Pacific. The
Asia-Pacific has been one of the most important, dynamic and
fast-growing consumer electronics markets over the past few years.
Most importantly, the region remains mostly under-penetrated in
comparison to other international markets, and thus represents a
huge opportunity, in our view.
We believe that DTS is well positioned to grab this huge
opportunity over the long term based on its partnerships with
several Asia-based companies such as Pantech, Fujitsu, Haier,
Samsung, LG, Panasonic, Changhong, Hisense, TCL, Konka, Skyworth
and Huawei. We believe that these partnerships will drive top-line
growth over the long term.
DTS's growth is totally dependent on Blu-ray penetration, which
increased 40.0% in 2011. However, we believe that the volatile
macro environment and sluggish consumer spending will remain
headwinds for Blu-ray sales going forward. Further, the company
faces significant competition from
Dolby Laboratories Inc. (
DLB
)
,
Sony Corp. (
SNE
)
and privately-held THX Limited, which will hurt its profitability
going forward.
Thus, we remain Neutral over the long term (6-12 months).
Currently, DTS Inc. has a Zacks #3 Rank, which implies a Hold
rating in the near term.
DOLBY LAB INC-A (
DLB
): Free Stock Analysis Report
DTS INC (
DTSI
): Free Stock Analysis Report
SONY CORP ADR (
SNE
): Free Stock Analysis Report
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