DISH Q2: Major Miss on EPS, But Shares Rise on Subscriber Growth

Aug.10.09 | About: DISH Network (DISH)

DISH Network (NASDAQ:DISH) shares are trading higher on stronger than expected Q2 subscriber growth.

For the quarter, the satellite TV service provider posted revenue of $2.904 billion, just below the Street consensus of $2.91 billion, and down 0.4% from a year ago. EPS of 14 cents a share was well below the Street at 67 cents, in part due to costs related to the company’s litigation with TiVo (NASDAQ:TIVO). Bernstein Research analyst Craig Moffett notes Monday morning that EPS would have been 47 cents without the TiVo-related expenses.

The big surprise was that the company gained 26,000 net new subs in the quarter, to end with 13.610 million. Moffet had expected a decline of 121,000, and reports that the consensus was for a drop of 131,000. ARPU was $70,72, up 1.9% year over year, and 1% sequentially.

But Moffett also noted that costs were hiher than expected, with subscriber acquisition costs up 7.5% from Q1. And he says other cost items “were arguably worse,” with pre-marketing cash flow down 15.4% year over year, and PMCF margin down 600 basis points. SG&A was up 17.3%. Moffett contends that “the cost structure troubles suggest that the problem of negative operating leverage is far from over,” and that the the case for DISH has been “weakened, not improved,” by the latest results.

Maybe so, but the Street is zeroing in on the nice surprise on the sub line: DISH Monday is up 86 cents, or 4.7%, to $19.28.

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