Televisa Outperforms

Buoyed by strong performance of its pay-TV network, Grupo Televisa S.A.B. ( TV - Analyst Report ) , reported solid first-quarter 2012 financial results, surpassing the Zacks Consensus Estimates. In the previous quarter, 28 of the top-thirty rated TV programs in Mexico were telecasted by the company. All the five business segments of Televisa generated double-digit growth. Besides, the bottom line benefited from higher operating income and a decrease in financing expenses.

Quarterly consolidated net income was approximately $152.7 million, up 72.8% year over year. First-quarter EPGDS (Earnings per Global Depository Shares) was 27 cents, more than double of the Zacks Consensus Estimate of 13 cents. Quarterly consolidated net revenue of around $1,184 million was an improvement of 14.8% over the prior-year quarter, beating the Zacks Consensus Estimate of $1,130 million.

Quarterly gross margin was 52.5% compared with 51% in the year-ago quarter. First-quarter consolidated operating income was $256.5 million, up 28.7% over the prior-year quarter. Quarterly operating margin was 21.7% compared with 19.3% in the year-ago quarter.

At the end of the first quarter of 2012, Televisa had over $1,820.7 million cash and marketable securities compared with $1,549.9 million at the end of 2011. Capital expenditure, during the reported quarter, was $12.2 million. At the end of the first quarter of 2012, Televisa had $4,205 million of outstanding debt on its balance sheet compared with $4,059.1 million at the end of 2011. At the end of the previous quarter, debt-to-capitalization ratio was 0.47 compared with 0.49 at the end of 2011.

Content Segment

Quarterly total revenue was $505.3 million, up 13.6% year over year. Operating profit was $202.9 million, up 20.1% year over year. Quarterly operating margin was 40.1% compared with 38% in the year-ago quarter. Within this segment, Advertising revenue was over $354 million, up 9.7% year over year. Network Subscription revenue was $58 million, up 22.5% year over year. Licensing and Syndication revenue was $93.3 million, up 24.6% year over year.

Publishing Segment

Quarterly revenue was $54.3 million, up 14.1% year over year. Operating profit was $2.6 million, up 65.3% year over year. Quarterly operating margin was 4.8% compared with 3.3% in the year-ago quarter.

Sky Segment

Quarterly revenue came in at $264.5 million, up 11.8% year over year. Operating profit was $122.8 million, up 10.3% year over year. Quarterly operating margin was 46.4% compared with 47.1% in the year-ago quarter.

Cable and Telecom Segment

Quarterly revenue was $294.5 million, up 16.8% year over year. Operating profit was $103.9 million, up 24.7% year over year. Quarterly operating margin came in at 35.3% compared with 33% in the year-ago quarter.

Other Businesses Segment

Quarterly revenue was $87.2 million, up 23.1% year over year. Operating income was $8.3 million compared with an operating loss of $3.8 million in the prior-year quarter. Quarterly operating margin was 9.5% compared with a negative 5.4% in the year-ago quarter.

Subscriber Statistics

As on March 31, 2012, Televisa had 2,218,288 Video subscribers; 1,140,149 Broadband subscribers; and 683,869 Telephony subscribers, which together constitutes 4,042,306 revenue generating units (RGU) in the Cable and Telecom segment. As on March 31, 2012, Televisa had 4,283,605 gross active Satellite TV subscribers including 160,108 commercial subscribers. These figures were up 29.3% and 5.6% year over year, respectively.

Our Recommendation

Televisa is at present facing a competitive threat from the telecom giant Telefonos de Mexico S.A.B. ( ) , who is trying to enter into the Mexican broadcast TV market passively through a deal with Dish Mexico. We maintain our long-term Neutral recommendation on Televisa. Currently, it holds a short-term Zacks #3 Rank (Hold) on the stock.