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Earnings Preview: DTS Inc.

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DTS Inc. is scheduled to release its second quarter 2011 results after the market closes on August 8, 2011.

Highlights from the Prior Quarter

DTS Inc. reported first quarter 2011 earnings per share (EPS) of 33 cents, beating the Zacks Consensus Estimate by 2 cents. The upside in earnings was driven by strong revenue growth in the quarter.

Revenues increased 23.2% year over year to $26.8 million, edging past the Zacks Consensus Estimate of $26.0 million. The growth was primarily driven by increased adoption of Blu-ray and network connected entertainment products, as well as a solid contribution from the automobile market.

For further details please read: DTS Beats; Reaffirms Guidance

Second Quarter Expectations

For the second quarter, the Zacks Consensus earnings estimate is 16 cents. The Zacks Consensus revenue estimate is $22 million.

We note that the average earnings surprise in the preceding four quarters is a positive 13.46%. Except for the last quarter, DTS Inc. has surpassed estimates in each quarter, and therefore we think the possibility of yet another earnings beat exists.

For fiscal 2011, DTS Inc. continues to expect revenues in the range of $100 million to $105 million, in line with the Zacks Consensus Estimate of $104.0 million. The company expects its operating margins in the low-40’s range.

DTS Inc. expects the non-GAAP EPS to range between $1.40 and $1.49 for fiscal year 2011, well above the Zacks Consensus Estimate of $1.13 per share.

Estimation Revision Trend

For the current quarter, none of the three analysts revised their estimates in either direction over the last thirty days.

Even for fiscal 2011, none of the analysts made any revision to their estimates over the past 30 days.

Analysts covering the stock expect the company’s incremental revenue exposure to the Blu-ray product cycle and accelerating earnings and revenue growth profile to continue driving its results in the fiscal 2011.


We maintain our Neutral rating on a long-term basis (6-12 months). We believe DTS Inc. will gain significant market share, riding on its strong product portfolio, increasing online availability and accelerated expansion of the DTS technology into new markets, such as smartphones, portable devices and digital media players.

Moreover, the company’s existing partnerships with the Internet Protocol television (IPTV) operators in the broadcast market will boost top-line growth and expand business going forward.

However, DTS continues to face stiff competition from Dolby Laboratories Inc. (DLB - Free Report) , Sony Corp. (SNE - Free Report) and privately held THX limited.

Currently, DTS Inc. has a Zacks #3 Rank, which implies a Hold rating on a short-term basis (1-3 months).

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