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Analyst Blog

Liberty Interactive Inc. (LINTA - Analyst Report) reported solid financial results for the third quarter of 2012, outpacing the Zacks Consensus Estimates. Quarterly net income was $49 million or 20 cents per share compared with $25 million or 10 cents per share in the year-ago quarter. Third-quarter 2012 earnings per share of 20 cents surpassed the Zacks Consensus Estimate of 18 cents. Quarterly total revenue of $2,196 million reflected a yearly improvement of 3%, surpassing the Zacks Consensus Estimate of $2,175 million.

Third-quarter 2012 gross margin was 35.9% compared with 36.1% in the prior-year quarter. Quarterly total operating income came in at $193 million as opposed to $225 million in the year-ago quarter. In the reported quarter, consolidated adjusted OIBDA came in at $397 million compared with $378 million in the year-ago quarter. In the previous quarter, Liberty Interactive repurchased approximately 3 million Class A shares for a total consideration of $55.9 million.  

In the first nine months of 2012, Liberty Interactive generated $944 million of cash compared with $516 million in the year-ago period. Free cash flow in the first nine months of 2012 was $707 million compared with $324 million in the prior-year period.

At the end of the third quarter of 2012, Liberty Interactive had total consolidated cash and marketable securities of $3,435 million compared with $2,015 million at the end of 2011. Liberty Interactive exited the third quarter of 2012 with $7,357 million of outstanding debt compared with $6,039 million at the end of 2011. Debt-to-capitalization ratio was 0.49 at the reported quarter end compared with 0.42 at the end of 2011.

QVC Segment

Quarterly total revenue of QVC segment was $1,918 million, up 1.7% year over year. Consolidated adjusted OIBDA was $397 million, up 7% year over year. Consolidated operating income was $260 million, up 11.1% year over year. QVC U.S. quarterly revenue inched up 3.4% year over year to $1,237 million. Gross margin was 36.1% compared with 35.7% in the year-ago quarter. Adjusted OIBDA was $278 million, up 7.3% year over year. Operating income was $173 million, up 8.8% year over year. QVC International quarterly revenue dropped 1.3% year over year to $681 million. Gross margin was 37.4% compared with 36.7% in the year-ago quarter. Adjusted OIBDA was $119 million, up 4.4% year over year. Operating income was $87 million, up 16% year over year.

eCommerce Segment

Quarterly revenue of eCommerce Business segment was $278 million, up 13% year over year. Quarterly adjusted OIBDA was $4 million, down 56% year over year. Operating loss was $56 million, in the quarter, much wider than an operating loss of $2 million in the prior-year quarter.

Recommendation

Liberty Interactive’s QVC division has become the undisputed market leader in the $8 billion TV home-shopping business. Currently, QVC commands an estimated 69% market share, far ahead of its nearest rivals, HSN Inc. (HSNI - Snapshot Report) and ValueVision Media Inc. (VVTV - Snapshot Report). We maintain our long-term Neutral recommendation on Liberty Interactive. Currently, the stock holds a short-term Zacks #3 Rank (Hold).

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