Strong 2Q for Liberty Media

Zacks

Liberty Media Corp. (LMCA) reported solid financial results for the second quarter of 2012, outpacing the Zacks Consensus Estimates. Quarterly GAAP net income was $156 million or $1.27 per share compared with a net income of $89 million or 27 cents per share. However, quarterly earnings per share of $1.27 were significantly above the Zacks Consensus Estimate of 74 cents. Quarterly total revenue of $537 million remains same year over year but surpassed the Zacks Consensus Estimate of $521 million.

In the second quarter of 2012, Liberty Media’s adjusted OIBDA (operating income before depreciation and amortization) came in at $126 million, remaining almost same year over year. Quarterly operating income was $101 million, up 7.5% year over year. In the previous quarter, Liberty Media repurchased 1.1 million shares for a total cash consideration of $95.9 million.

During the first half of 2012, Liberty Media generated $131 million of cash from operations compared with $278 million in the prior-year period. Free cash flow in the first half of 2012 was $125 million compared with $272 million in the year-ago period.

At the end of the second quarter of 2012, Liberty Media had $3,716 million of cash and cash equivalents compared with $3,929 million at the end of 2011. Total debt, at the end of the reported quarter, was $543 million compared with $1,295 million at the end of 2011. At the end of the previous quarter, debt-to-capitalization ratio was 0.09 remains flat at the end of 2011.

Starz LLC Segment

Revenue in the second quarter of 2012 was $403 million, remaining same year over year. Adjusted OIBDA decreased 8.5% year over year to $108 million. Operating income was $100 million, showing an yearly decline of 16.7%. At the end of the reported quarter, total subscribers base of Starz increased 9% to 20.7 million while its sister TV channel Encore had 34.2 million subscribers, up 4% year over year.

Major Announcement  

Liberty Media has decided to spin-off its premium pay-TV network Starz LLC into a separate public company. Earlier, the company had announced its plan of considering a tax-free spin-off of its 46% stake in the satellite radio broadcaster SIRIUS XM Radio Inc. (SIRI).

Recommendation

We maintain our long-term Neutral recommendation on Liberty Media. Currently, it holds a short-term Zacks #2 Rank (Buy) on the stock.

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