DIRECTV Misses Top and Bottom Line
Satellite TV provider DIRECTV (NASDAQ: DTV – $61.70) announced an increase in second quarter revenues of 7% to $7.70 billion, a decline in operating profit of 4% to $1.35 billion, but a higher earnings per share of 8% to $1.18 (on a significantly lower share count) compared to last year’s second quarter of $1.09. Analysts were looking for something closer to $1.33 per share on revenue of $7.75 billion for the period. Net subscriber losses in DIRECTV’s large U.S business totaled 84,000, up from net subscriber losses of 52,000 a year earlier. The total subscriber base stood at 20 million at the quarter’s end, compared with 19.9 million a year ago. The company added a net 165,000 subscribers in Latin America, versus the 645, 000 subscribers added a year earlier, which disappointed Wall Street. Brazil, Argentina, Columbia and a number of other South American countries have been DTV’s primary growth driver over the past few years, and a slowdown is worrisome should it continue. The company had a total of 11.1 million subscribers in the region by the end of the quarter, up from 9.1 million the year earlier. Despite this quarterly set back, I believe the shares still have some room to run further down the road, assuming no further systemic subscriber slowdowns both domestically and in Latin America. More share repurchases are likely for 2013 and 2014, as well. Too, a relatively low P/E multiple of 12.3 based on my new full-year earnings forecast of $5.00 lends further support to an argument to retain the shares in an aggressive account for now.