The Zacks Analyst Blog Highlights: DISH Network, EchoStar, TiVo, Royal Caribbean Cruises and Carnival

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May 03, 2011, 09:59 ET

CHICAGO, May 3, 2011 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: DISH Network Corp. (Nasdaq: DISH), EchoStar Corp. (Nasdaq: SATS), TiVo Inc. (Nasdaq: TIVO), Royal Caribbean Cruises Ltd. (NYSE: RCL) and Carnival Corporation (NYSE: CCL).

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Here are highlights from Monday's Analyst Blog:

DISH Profit Soars in Q1

DISH Network Corp. (Nasdaq: DISH) declared financial results for the first quarter of 2011. Quarterly GAAP net income was $549 million or $1.22 per share compared with a net income of $218.2 million or 52 cents per share in the prior-year quarter. First quarter of 2011 EPS of $1.22 was well above the Zacks Consensus Estimate of 68 cents.

This fabulous performance was primarily attributable to higher total revenue and lower subscriber promotion subsidies, which declined by a whopping 27.7% year over year.

In another major development, DISH Network and its sister concern EchoStar Corp. (Nasdaq: SATS) have settled all their pending legal battles with TiVo Inc. (Nasdaq: TIVO) related to patent infringement. DISH Network and EchoStar will pay $500 million to TiVo, of which $300 million will be paid upfront and the remaining $200 million will be paid in six equal installments during 2012-2017.

Quarterly total revenue increased 5.4% to $3,220.6 million, from $3,056.7 million in the year-ago quarter. This was mainly due to an increase in subscriber related revenue.

However, the first quarter revenue fell below the Zacks Consensus Estimate of $3,235 million. DISH Network gained 58,000 net subscribers during the reported quarter, which raised its total subscriber base to 14.191 million on March 31, 2011.

Segment wise, Subscriber related quarterly revenue was approximately $3,195.7 million, up 5.3% year over year. Equipment sales & other revenue was $15.9 million, up 14.9% year over year. Equipment sales, services, and other revenue from EchoStar was $9 million, up 21.5% year over year.

Average monthly subscriber churn rate in the first quarter of 2011 was 1.47% compared with 1.40% in the year-ago quarter. Average revenue per user (ARPU) in the reported quarter was $75.39 compared with $71.18 in the prior-year quarter. Average subscriber acquisition cost in the same quarter was $725 compared with $741 in prior-year quarter.

In the first quarter of 2011, Subscriber-related expenses increased 3.2% year over year to $1.7 billion, caused by higher programming content costs and expenses related to call center operations. Subscriber acquisition cost decreased by 13.9% year over year to $354.6 million. Depreciation and amortization expenses were $228.1 million, down 4.7% year over year.

General and administrative expenses grew 6.7% year over year to $159.8 million on higher personnel costs and professional fees to support the network. Quarterly operating income increased by a whopping 115.2% to $985.4 million, while operating margin rose to 30.6%, from the year-ago level of 15%. Accordingly, first quarter of 2011 EBITDA was $1,226.1 million compared with $697.5 million in the year-ago quarter.

During the first quarter of 2011, DISH Network generated $742.6 million of cash from operations compared with $592.3 million in the year-go quarter. Free cash flow (cash flow from operations less capital expenditures) in the reported quarter was $509.7 million compared with $325.6 million in the prior-year quarter.

At the end of the first quarter of 2011, DISH Network had $2,571.7 million of cash and marketable securities and $6,227.6 million of outstanding debt on its balance sheet compared with $3,164.9 million of cash and marketable securities and $6,514.9 million of outstanding debt on its balance sheet at the end of fiscal 2010.

Recommendation

We maintain our long-term Neutral recommendation on DISH Network. Currently it holds a short-term Zacks #3 Rank (Hold) on the stock.

Royal Caribbean Excels on Bottom Line

Royal Caribbean Cruises Ltd. (NYSE: RCL) reported first-quarter 2011 adjusted earnings of 31 cents per share, breezing past the Zacks Consensus Estimate of 13 cents and showing a strong improvement from the year-earlier quarter's earnings of one penny. On a GAAP basis, Royal Caribbean's first-quarter earnings were 42 cents a share versus 40 cents recorded in the comparable quarter last year.

The quarter's earnings also surpassed management's guidance range of 10 cents to 15 cents per share. Strong results came on the back improved bookings and strict cost control.

Outlook

For the second quarter, Royal Caribbean expects the bottom line to range between 40 cents to 45 cents, below the Zacks Consensus Estimate of 56 cents. Net revenue yields are expected to increase 5% (up 1% to 2% at constant currency).

Excluding fuel expenses, net cruise costs are estimated to rise 4–5% (up 2% at constant currency) in the upcoming quarter. Fuel costs are expected to be $189 million.

For full-year 2011, management expects earnings per share (EPS) in the range of $3.10 to $3.30 (earlier $3.25 to $3.45). Net revenue yield is expected to be up 5–7% (up 3–5% at constant currency). Net cruise cost excluding fuel is projected to spike 4–5% (up 2% to 3% at constant currency). Fuel expenses for 2011 are expected to be $770 million per metric ton.

Our Take

Though Royal Caribbean has bettered the Zacks Consensus Estimate on the bottom line, the outlook provided by the company was below expectations. Moreover, the company cut its full-year EPS guidance range due to geopolitical risks in North Africa and the earthquake in Japan. These disturbances compelled Royal Caribbean to modify some of its sailings, which adversely affected both demand and yield. The upcoming quarter is expected to be affected the most by the ongoing political unrest. Hence, we expect estimates to go down in the coming days.

However, as these threats are short-term in nature, we remain positive on the stock of the world's second-largest cruise operator based on a host of factors including strong booking momentum in Caribbean and Alaskan itineraries, increased tour activities from the company's Spanish brand, Pullmantur, efficient expense control, especially fuel conservation efforts, and the slowdown in industry capacity. Royal Caribbean currently retains the Zacks #4 Rank, which translates into a short-term Sell rating. We are also maintaining our long-term Neutral recommendation on the stock.

The company's biggest competitor, Carnival Corporation (NYSE: CCL) reported its first quarter earnings of 19 cents, which came in line with the Zacks Consensus Estimate but was below the year-ago quarter's earnings of 22 cents.

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