Will Dish Network (DISH) Q1 Earnings Disappoint Investors? - Analyst Blog

Dish Network Corp.DISH , the second largest satellite TV operator in the U.S., is slated to report its first-quarter 2015 earnings results on May 11, before the opening bell.

Last quarter, Dish Network had posted a positive earnings surprise of 104.65%. In fact, though Dish Network's earnings have missed the Zacks Consensus Estimate in three of the last four quarters, the company has managed to deliver an average beat of 14.27%. Let's see how things are shaping up for this announcement.

Factors Likely to Influence this Quarter

In Feb 2015, the company launched its Internet TV service - Sling TV. The network presently offers 20 channels for $20 per month. More recently, Sling TV added HBO to its line-up of over-the-top programming. Venturing into the Internet TV industry and capitalizing on the opportunities therein should help the company minimize its losses in the legacy pay-TV business in the first quarter.

Moreover, an extensive wireless spectrum portfolio, innovative product launches and the renewal of various multi-year carriage agreements are likely to spur growth for the company, going forward. Further, we believe such value-added services will boost the company's top and bottom line higher going ahead. Not only that, it will also help the company curtail subscriber churn rate and boost ARPU numbers in the coming quarters.

Notably, Dish Network was one of the major license winners in the AWS-3 spectrum auction conducted by the FCC. Interestingly, immediately after the FCC declared the name of the auction winners on Feb 2, 2015, Dish Network claimed that it is eligible for a 25% discount on the total value of winning bids under FCC's "DE" program. However, the FCC has decided to thoroughly review the company's claim of a discount worth $3.3 billion.

Meanwhile, the failure to strike any deal with wireless operators to deploy a nationwide wireless network has been a major drawback for the company in recent times. This may weigh on the first-quarter results as well. Rising programming costs and mounting debt may also hamper profitability at Dish Network in the to-be-reported quarter.

Earnings Whispers

Our proven model does not conclusively show that Dish Network is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here as elaborated below.

Zacks ESP : Dish Network has an earnings ESP of -7.32%. This is because the Most Accurate estimate stands at 38 cents while the Zacks Consensus Estimate is pegged higher at 41 cents.

Zacks Rank : Dish Network has a Zacks Rank #3 which increases the predictive power of ESP. Nevertheless, we need to have a positive ESP to be confident of an earnings surprise.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies to consider as our model shows these have the right combination of elements to post an earnings beat this quarter:

Intuit Inc. INTU , with an earnings ESP of +2.34% and a Zacks Rank #2.

Vista Outdoor Inc. VSTO , with an earnings ESP of +5.17% and a Zacks Rank #3.

Hortonworks, Inc. HDP , with an earnings ESP of +1.18% and a Zacks Rank #3.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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