Entertainment technology provider
DTS Inc. (
is scheduled to announce its third quarter 2012 results after the
market closes today (November 8, 2012). As per the Zacks
Consensus Estimate, the company is expected to earn 3 cents per
share in this quarter based on an estimated 22.0% year-over-year
growth in revenue to $25.0 million.
DTS reported mixed second quarter 2012 results, with earnings
exceeding the Zacks Consensus Estimate by 8 cents but revenue
missing the consensus mark.
Revenue climbed 5.7% year over year to $21.8 million during
the quarter. The year-over-year growth was driven by 81.0% annual
surge in network-connected business (30% of total revenue). This
strong growth fully offset an 11.0% year-over-year decline in the
Blu-Ray business (25.0% of total revenue).
DTS expects full year 2012 revenue to be in the range of
$110.0 million to $115.0 million (down from prior outlook of
$112.0 million to $116.0 million). Operating margin is now
expected to be approximately 20.0% (down from 40.0%) and earnings
are expected in the range of 90 cents to $1.00 per share (down
from prior outlook of $1.60 to $1.65 per share).
For further details please see
DTS Reports Mixed 2Q
Estimate Revision Trend
In the run-up to the earnings report, we witness no variation
in the consensus estimates. Given no changes in the Zacks
Consensus Estimate for the third quarter of 2012 over the last 30
days, the analysts appear to be confident about their
We note that on an average, DTS has posted an earnings
surprise of negative 14.17% in the trailing four quarters,
implying that it has underperformed 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
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
Moreover, DTS continues to invest in the network connected
business, which will help it to gain significant market share
going forward. This, coupled with higher penetration in the
Chinese smartphone market and incremental revenue from the
acquisition of SRS labs, will drive top-line growth in 2013.
However, we believe that the volatile macro environment,
weakness in the consumer electronics market and sluggish consumer
spending will remain headwinds for DTS going forward. We also
believe that the strong growth of network connected devices will
eventually cannibalize the sales of DVD-based products and
Further, the company faces significant competition from
Dolby Laboratories Inc. (
Sony Corp. (
and privately-held THX Limited, which will hurt its profitability
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.
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