Analysts Split on Dish Q1


Dish Network offered analysts a mixed bag Monday, soundly beating consensus estimates by adding 104,000 net new subscribers in the first quarter, but missed some revenue and cash flow targets.
"[I]t was a clear and decisive beat for the operating line item that is probably the most single
important one in determining future profitability," Sanford Bernstein cable and satellite analyst Craig Moffett wrote in a report Monday, adding that consensus estimates were for the satellite giant to add about 62,000 net new customers. And churn was a record low 1.35%, which helped drive net customer growth.
"DISH delivered a solid quarter for net subscriber growth and financial performance," said DISH CEO Joseph Clayton, in a statement "I am encouraged by two quarters of net additions, as well as a reduction in churn. The market's reception to the Hopper launch this March was favorable and we think it will be a great platform for the future."
But Moffett was less encouraged by flat revenue growth - subscriber-related revenue rose just 0.8% -- and a decline in cash flow. While earnings before interest, taxes, depreciation and amortization at $892 million beat most analysts estimates of about $868 million, it was still 27% below the $1.2 billion generated last year and included about $110 million in one-time items that drive the results down even further.
"If that's the ultimate measure of a successful turnaround, then there's still a ways to go," Moffett wrote.
While Moffett expressed concern, other analysts focused more on the positive subscriber metrics - free cash flow growth was strong at 12% to $689 million..
"This has been a company that desperately needed a positive operational quarter - and it defied all expectations," wrote ISI Group media analysts Vijay Jayant and Judah Rifkin in a research note.
Credit Suisse media analyst Stefan Anninger also was encouraged by the subscriber metrics, adding that the EBITDA miss was due mostly to increased programming and subscriber acquisition costs.
"We believe that the lack of a 1Q12 price increase, as well as investments in, and a focus on, core operations, including customer service, conditional access, more stringent credit checks, [and] auto-pay, are yielding favorable results," Anninger wrote. "In our view, churn is the key metric by which DISH's operational performance must be judged. And from this perspective, 1Q12 was a solid quarter."
Dish stock was down about 4% ($1.24 each)in early trading Monday, priced at $30.07 per share.
Dish management is scheduled to hold a conference call with analysts at noon today.