Zacks Bull and Bear of the Day Highlights: Kinetic Concepts, Universal Technical Institute, TiVo, DISH Network and Comcast
CHICAGO, May 26, 2011 /PRNewswire/ -- Zacks Equity Research highlights: Kinetic Concepts (NYSE: KCI) as the Bull of the Day and Universal Technical Institute (NYSE: UTI), as the Bear of the Day. In addition, Zacks Equity Research provides analysis on TiVo Inc. (Nasdaq: TIVO), DISH Network (Nasdaq: DISH) and Comcast Corp. (Nasdaq: CMCSK).
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Full analysis of all these stocks is available at http://at.zacks.com/?id=2678.
Here is a synopsis of all five stocks:
Kinetic Concepts' (NYSE: KCI) first quarter fiscal 2011 adjusted EPS was $1.11, beating the year-ago quarter's $0.91. Active Healing Solutions revenues increased banking on higher unit volumes in the US, resulting from increased usage of traditional VAC therapy products and new negative pressure-based therapies. The LifeCell business increased penetration into EMEA markets.
Though the company had been witnessing declining TSS revenue, the situation has improved a lot, which is reflected in the sequential improvement in this segment. Kinetic is targeting new geographies as well as opting for meaningful diversification of its products.
We expect further expansion of Kinetic's business in the upcoming quarters and accordingly upgrade the stock to Outperform. Our target price of $71 per share is based on 14.1x our 2011 EPS estimate of $5.03.
Universal Technical Institute's (NYSE: UTI) average enrollment of the educational institute rose 8.5% in the first quarter but dropped 690 basis points sequentially. Moreover, the rate of fall in the new enrollments accelerated to 13% during the quarter, following a decline of 5% in fourth-quarter 2010.
Management warned that enrollment of new students for fiscal 2011 will be below the prior-year level due to regulations proposed by the Department of Education, and will consequently result in a single-digit revenue growth.
We have a long-term Underperform recommendation on the stock. Our target price of $16.00, 12.5X 2011 EPS, reflects this view.
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TiVo Beats on Patent Settlement
A developer of advanced television services including digital video recorders (DVR), TiVo Inc. (Nasdaq: TIVO) reported earnings per share (EPS) of $1.04 per share in the first quarter of 2012, comprehensively beating the Zacks Consensus Estimate of a loss of 31 cents and the loss of 13 cents per share in the prior-year quarter.
The better-than expected results were primarily driven by litigation proceeds of $175.7 million in the quarter that TiVo received related to the patent settlement with DISH Network (Nasdaq: DISH).
Operating performance
TiVo reported first quarter 2012 net income of $140.1 million compared with a net loss of $14.2 million in the prior-year quarter. Net income includes litigation proceeds of $175.7 million and $2.9 million in related interest income.
Gross profit decreased 21.0% year over year to $15.4 million, due to declining revenue growth. However, gross margin expanded 250 basis points (bps) to 46.1% in the reported quarter, primarily attributable to lower service and hardware costs.
Operating expenses, excluding litigation proceeds, escalated 38.7% year over year to $57.3 million. Research & development (R&D) expenses surged 46.2% year over year to $27.2 million in the quarter.
TiVo reported an operating income of $139.5 million compared with a loss of $14.5 million in the prior-year quarter. Including the litigation proceeds, adjusted EBITDA came in at $149.4 million.
Revenue
Revenues decreased 25.4% year over year to $45.8 million in the first quarter and were also below the Zacks Consensus Estimate of $54.0 million. The weakness in year-over-year comparison was primarily due to an 8.0% decline in Service revenue, 21.0% decline in Technology revenue and 62.0% decline in Hardware revenue during the quarter.
TiVo-owned subscription gross additions for the quarter were 27,000 compared with 33,000 gross additions in the year-ago quarter. Churn rate increased to 2.3% in the quarter. Subscription acquisition costs, however, decreased 8.4% year over year.
Guidance
TiVo expects Service and Technology revenues to range between $46.0 million and $48.0 million. Management expects net loss in the range of $25.0 million to $27.0 million in the second quarter. Adjusted EBITDA is expected at between ($14.0) million and ($16.0) million for the second quarter of 2012.
For fiscal 2012, TiVo expects the patent settlement with DISH to reduce legal expenses by approximately 20.0%. TiVo believes that the recurring stream of high-margin licensing revenue from DISH and declining expenses will boost adjusted EBITDA for fiscal 2012 and beyond.
Our Take
Recently, TiVo announced the availability of Hulu Plus retail Premier DVRs. TiVo also entered into an agreement with Comcast Corp. (Nasdaq: CMCSK), which allows subscribers to access Comcast's robust library of Xfinity TV On Demand content on TiVo Premiere set-top boxes.
We continue to believe that new partnerships with leading companies coupled with new customer wins, product launches and international expansion will drive top-line growth.
The biggest positive, in our view, is the settlement of the patent suit against DISH and EchoStar. This has not only reduced legal expenses but also provided a recurring revenue stream for TiVo over the long term. We believe TiVo's financial position will also improve due to the settlement.
Moreover, we believe that this settlement has enhanced TiVo's reputation justifying the aggression with which it has been defending its intellectual property.
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=2649.
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