The largest U.S satellite TV operator,
DIRECTV
(
DTV
), has posted mixed second-quarter 2012 results, with the bottom
line missing the Zacks Consensus Estimate but the top line
surpassing it. Moreover, record customer addition in the Latin
American region was partially offset by customer loss in the U.S.
region.
Total revenue in the reported quarter came in at $7,224 million,
up 9.5% year over year, and slightly ahead of the Zacks Consensus
Estimate of $7,203 million. Such impressive growth in revenue was
mainly attributable to huge subscriber growth in Latin American
region.
Quarterly GAAP net income was $711 million or $1.09 per share
compared with $701 million or 91 cents per share in the year-ago
quarter. Quarterly earnings per share of $1.09 per share fell short
of the Zacks Consensus Estimate of $1.14.
Quarterly operating profit before depreciation &
amortization (OPBDA) was $2,009 million, up 8.8% year over year.
Moreover, operating profit in the reported quarter stood at $1,411
million, up 14.7% year over year.
At the end of the second quarter of 2012, DIRECTV generated
$3,024 million of cash from operations compared with $2,404 million
in the prior-year quarter. Free cash flow (cash flow from
operations less capital expenditures) was $471 million in the
quarter compared with $395 million in the year-ago quarter.
At the end of the second quarter of 2012, DIRECTV had $2,132
million in cash & cash equivalents and $15,962 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 $5,647 million, up 7% year over
year on the back of strong subscriber base and significant ARPU
growth. Quarterly ARPU was $94.4 against $90.58 in the prior-year
quarter. Growth in ARPU was mainly fueled by price increases on
programming packages and leased boxes, higher advanced service fees
and higher penetration of premium channels.
Quarterly operating profit before depreciation &
amortization upped 9.6% to $1,585 million primarily buoyed by
reduced subscriber acquisition cost. Quarterly operating
profit climbed 19.7% to $1,216 million.
Average monthly subscriber churn rate in the reported quarter
was 1.53% compared with 1.59% in the prior-year quarter. Quarterly
net subscriber losses were 52,000 compared with 26,000 subscriber
additions in the year-ago quarter. As of June 30, 2012, DIRECTV
U.S. had 19.914 million subscribers, up 2.5% on an annualized
basis.
DIRECTV Latin America Segment
Segment revenue was $1,508 million, up 20.3% year over year, on
account of record subscriber growth. Quarterly ARPU was $57.2
versus $64.56 in the prior-year quarter, primarily driven by
foreign currency fluctuation. Quarterly operating profit before
depreciation & amortization increased 5.2% to $445 million and
operating profit fell 7.1% to $224 million.
Average monthly subscriber churn rate in the reported quarter
was 1.80% compared with 1.81% in the prior-year quarter. Quarterly
net subscriber addition was 645,000 compared with 472,000 in the
year-ago quarter. As of June 30, 2012, DIRECTV Latin America had
approximately 9.116 million subscribers, up 35.9% year over
year.
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, may act as headwinds for the
company in the 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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