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Earnings Preview: Dish Network

DTV DISH

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Dish Network Corp. (DISH - Analyst Report) is slated to release its third-quarter 2012 earnings results on Tuesday, November 6, before the opening bell. The Zacks Consensus Estimate for the reported quarter is pegged at $0.55, representing a decline of 22.13% from the year-ago quarter.

With respect to earnings surprises, Dish Network has outperformed the Zacks Consensus Estimate in two of the last four quarters with an average beat of 4.26%.

Second Quarter Recap

On August 8, Dish Network reported its second-quarter 2012 financial results. Adjusted earnings per share (excluding special items) of 59 cents in the second quarter were shy of the Zacks Consensus Estimate of 63 cents. Quarterly GAAP net income was approximately $225.7 million or 50 cents per share compared with a net income of $334.8 million or 75 cents per share in the prior-year quarter.

Dish Network posted quarterly total revenue of about $3,571.8 million, down 0.5% year over year and also below the Zacks Consensus Estimate of $3,650 million. Second-quarter 2012 operating income plummeted by 34.8% to $468.4 million while, quarterly EBITDA was around $760.2 million compared with $935 million in the year-ago quarter.

Agreement of Estimate Revisions

Over the last one month, out of the total 14 estimates, three were revised upward while two moved in the opposite direction for the third quarter. For the fourth quarter of 2012, out of the total 13 estimates, no upward revision was witnessed, while two moved downward over the same time frame.

In the last 30 days, out of the total 10 estimates, there were two upward revisions while the same number of estimates moved in the opposite direction for 2012. For 2013, out of the total 14 estimates, three estimates moved north, while four moved south over the same time period.

Magnitude of Estimate Revisions

Over the last 30 days, the current Zacks Consensus Estimate has remained unchanged at 55 cents for the third and fourth quarter of 2012. However, the current Zacks Consensus Estimate improved by a penny for 2012 over the last 30 days, while the estimate has deteriorated by 5 cents to $2.45 for 2013 over the same time frame.

Recommendation

DISH Network is transforming itself from a low-priced leader in the U.S. pay-TV industry to a premium service provider to reduce its subscribers’ churn rate. Innovative features like the AUTO HOP technology that enables any DISH Network subscriber to record prime time TV programming from four major networks could act as a value addition for its customers thereby driving subscriber growth and retention. Additionally, the new movie streaming services that DISH Network started after its acquisition of Blockbuster movie chain have not only led to better overall pay-TV services and increased customer loyalty but will also boost subscriber growth in the upcoming quarters.

However, the company faces stiff competition from DIRECTV (DTV - Analyst Report) and other cable TV operators. Furthermore, Telecom operators are quickly gaining market share from cable TV and satellite TV service providers by offering fiber-based TV and other high-speed broadband services to subscribers thus posing a threat to DISH Network.

We maintain our long-term Neutral recommendation on Dish Network Corp.  Currently, the company retains a short-term Zacks #3 Rank (Hold) on the stock.

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