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Dish (DISH) Down 7.4% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research

A month has gone by since the last earnings report for Dish Network (DISH). Shares have lost about 7.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Dish due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

DISH Q2 Earnings Miss, Revenues Down Y/Y

DISH Network reported second-quarter 2019 earnings of 60 cents per share that missed the Zacks Consensus Estimate by 6 cents and declined 27.7% year over year.

Revenues declined 7.2% year over year to $3.21 billion but surpassed the consensus mark of $3.14 billion.

The United States revenues declined 7.3% year over year to $3.20 billion. Canada and Mexico revenues increased 7.3% from the year-ago quarter to $10.8 million.

DISH exited the reported quarter with 9.560 million DISH TV and 2.472 million Sling TV subscribers. Total Pay-TV subscribers were 12.032 million.

Wireless Details

On Jul 26, 2019, DISH announced that it will enter the U.S. wireless market as the fourth, nationwide, facilities-based network competitor.

The company has inked agreements with the Antitrust Division of the U.S. Department of Justice (DOJ), T-Mobile U.S., Inc. and Sprint Corporation to complete this transaction.

Moreover, per the latest agreement, Jun 14, 2023, is now DISH’s deadline to provide 70% of the nation's population access to its 5G broadband network.

Additionally, following completion of the merger between Sprint and T-Mobile, DISH will buy Sprint's prepaid businesses and customers, including Boost Mobile, Virgin Mobile and the Sprint-branded prepaid service.

The company will also acquire 14 MHz of Sprint's nationwide 800 MHz spectrum.

Segment Details

Subscriber-related revenues (98.5% of revenues) declined 7.5% from the year-ago quarter to $3.16 billion. Equipment sales and other revenues increased 10% to $39.4 million.

Pay-TV video and related revenues fell 7% to $3.12 billion. Broadband revenues plunged 32.5% year over year to $45.5 million.

Pay-TV ARPU increased 0.9% year over year to $86.34, driven by DISH TV programming package price increases in 2018 and the first quarter of 2019, and higher revenues from advertising services.

Pay-TV subscribers declined approximately 31K compared with 151K subscribers lost in the year-ago quarter. Moreover, the churn rate was 1.48% compared with 1.46% in the year-ago quarter.

DISH added approximately 48,000 net Sling TV subscribers compared with roughly 41,000 added in the year-ago quarter. This increase was primarily driven by higher Sling TV subscriber activations.

Operating Details

In the second quarter, subscriber-related expenses declined 7.3% year over year to $2 billion. As percentage of revenues, subscriber-related expenses decreased 10 basis points (bps) on a year-over-year basis to 62.3%.

Total subscriber acquisition costs (SACs) increased 29.9% from the year-ago quarter to $238.1 million. As percentage of revenues, SACs expanded 210 bps to 7.4%.

DISH TV SAC was $786, up 3% year over year primarily due to increase in advertising and hardware costs.

EBITDA decreased 24.9% year over year to $559.7 million. EBITDA margin contracted 410 bps on a year-over-year basis to 17.4%.

Operating income fell 24.8% year over year to $430.7 million. Operating margin contracted 310 bps to 13.4%.

Balance Sheet

As of Jun 30, 2019, cash, cash equivalents and current marketable investment securities were $2.73 billion compared with $2.39 billion as of Mar 31, 2019.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month.

VGM Scores

At this time, Dish has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions has been net zero. Notably, Dish has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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