Satellite

Mixed Q1 Bag At DirecTV

5/08/2012 10:21 AM Eastern

DirecTV delivered a mixed bag in the first quarter, with domestic operations showing signs of slowing while its Latin American businesses continued to shine.
Domestically, DirecTV reported 81,000 net new subscribers, slightly missing analysts' consensus estimates of 92,000 additions. On the financial front, U.S. revenue rose 7% to $5.5 billion (slightly behind consensus) and operating profit before depreciation and amortization increased 3.4% to $1.4 billion, matching consensus estimates.
Analysts were split concerning the satellite giant's U.S. performance - with some expressing concern over the weakness in the U.S. operations and others claiming that the satellite giant is delivering steady, profitable growth.
"In our view, DirecTV's 1Q results further our concerns regarding the health of the US operations, as well as the costs of operating in the Latin American markets," Nomura Securities analysts Mike McCormack wrote in a research note. "US incremental margins were negative for the second quarter in a row, and without a subscriber beat to soften the blow, investors should question the operational strategy."
On the other side, Sanford Bernstein cable and satellite analyst Craig Moffett agreed that the U.S. operations are slowing down. But he noted the company is dramatically lowering churn - at 1.4% 6 basis points below last year - and raising average monthly revenue per unit - up 3.6% to $91.99 in the period.
"That's the ideal formula for profitability," Moffett wrote.
While domestic operations were mixed, DirecTV's Latin American division continued to shine. DirecTV LA added 593,000 net new customers in the period and revenue increased 33% to $1.49 billion. OPBDA rose 22% to $468 million.
DirecTV stock fell 2.2% ($1.05 each) in early trading Tuesday to $46.86 per share.
DirecTV is scheduled to hold a conference call with analysts at 2 p.m. today.

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