DIRECTV Beats Zacks Estimates - Analyst Blog

DIRECTV (DTV) today declared excellent financial results for its second quarter 2010. Supported by double-digit revenue and significant margin expansion, both top-line and bottom-line outperformed the Zacks Consensus Estimates. During the reported quarter, the company has started two new services: viz and Whole Home DVR, as well as a bundle offering of three dedicated 3D channels.

Second quarter 2010 revenue of $5,848 million was an improvement of 12% year-over-year and well above the Zacks Consensus Estimate of $5,714 million. This was primarily due to massive subscriber growth in both the U.S. and Latin America regions.

Quarterly GAAP net income was $543 million or 42 cents per share compared to a net income of $407 million or 40 cents per share in the year-ago quarter. However, in the reported quarter, DIRECTV incurred around $160 million of one-time charges related to a share transaction with former CEO John Malone and his family. Excluding this, second quarter 2010 EPS of 60 cents was above the Zacks Consensus Estimate of 59 cents.

Quarterly operating profit before depreciation & amortization (OPBDA) was $1,635 million, up 18% year-over-year. Second quarter operating profit was $1,010 million, up 43.9% year-over-year. The company paid a total $1.72 billion for repurchasing shares. Additionally, the board of directors of DIRECTV further extended the share buyback program by $2 billion.

During the first half of 2010, DIRECTV generated $2,494 million of cash from operations compared to $2,040 million in the year-ago period. Free cash flow (cash flow from operations less capital expenditures) in the same period was $1,414 million compared to $1,007 million in the year-ago period.

At the end of the second quarter 2010, DIRECTV had $2,000 million of cash & cash equivalents and $8,709 million of outstanding debt on its balance sheet compared to $2,605 million of cash & cash equivalents and $8,010 million of outstanding debt at the end of fiscal 2009. At the end of the second quarter 2010, debt-to-capitalization ratio was 0.85 compared to 0.69 at the end of fiscal 2009.

DIRECTV U.S. Segment
 
Quarterly total revenue was $4,934 million, up 9% year-over-year. Quarterly ARPU increased 5.7% to $87.9. Quarterly operating profit before depreciation & amortization increased 12% to $1,394 million and operating profit increased 37.9% to $899 million.

Average monthly subscriber churn rate in the reported quarter was 1.51%, remains flat year-over-year. Quarterly net subscriber addition was 100,000 compared to 224,000 in the year-ago quarter. As of June 30, 2010, DIRECTV U.S. had 18.76 million subscribers, up 2.5% year-over-year.
 
DIRECTV Latin America Segment
 
Quarterly total revenue was $857 million, up 26% year-over-year. Quarterly ARPU increased 3.1% to $56.98. Quarterly operating profit before depreciation & amortization increased 66% to $265 million and operating profit increased 91.8% to $140 million.

Average monthly subscriber churn rate in the reported quarter was 1.63% compared to 1.91% in the prior-year quarter. Quarterly net subscriber addition was a record high 415,000 compared to 128,000 in the year-ago quarter. As of June 30, 2010, DIRECTV Latin America had approximately 5.224 million subscribers, up 25.5% year-over-year.

Currently, DIRECTV is Zacks #3 Rank (Hold) stock, which supports our Neutral recommendation.
 
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