Q2 Preview: Dish Network (DISH) Previous Promotions Expiring; Subs, Churn in Focus

Shares of satellite-TV broadcaster Dish Network (Nasdaq: DISH) are trading close to 7 percent lower Monday ahead of its second-quarter earnings results.

Ahead of the bell Tuesday, Dish is expected to report earnings of 79 cents per share on revenue of $3.41 billion. Earnings would be a drop of 35 percent from $1.22 per share reported last quarter, but a gain of 49 percent from the same period last year.

Shares gained 26 percent last quarter and are down 24 percent since. The stock is up about 19 percent from the beginning of 2011. Dish has traded in a range of $17.33 to $32.57 over the last 52 weeks.

Dish is going for a modest P/E of 8x FY12 EPS estimates, compared with 11x for Comcast (Nasdaq: CMCSA) and 10.2x at DirecTV (NYSE: DTV).

Dish added just 58,000 net subscribers last quarter, which the company attributed to "a decline in gross new subscriber activations and increased churn." Churn increased to 1.47 percent from 1.40 percent.

Data from Bloomberg has 11 analysts with a Buy rating on Dish, eight at Hold, and one suggesting to Sell. The price target average is $36, with a low of $21 and high of $39.

Analyst Commentary

• Goldman Sachs is modeling earnings of 70 cents per share. The firm sees focus around "the recent spate of acquisitions, with less emphasis on operating or financial results." Impacts from promotional activity in the second quarter of 2009 and seasonality should provide Dish with negative net adds in the quarter, according to Goldman. "In particular, we highlight DISH’s $9.99 promotion offered in 2Q09 that targeted digital transition customers, who are more apt to churn off following the expiration of the two year contract this year. Our net add forecast of (5K) is +14K yoy and down 65K sequentially."
  
  
• Deutsche Bank sees earnings of 83 cents per share on revenue of $3.508 billion. On the quarter, Deutsche sees gross adds of 731K, with 3,000 net adds, and churn of 1.71 percent. Video ARPU should increase 9.3 percent to $79.87.
  
  On its outlook, Deutsche says, "Key is (1) any change in operating strategy and/or investor transparency under new CEO Joe Clayton; (2) whether our belief that churn will drop is proven out; (3) Chairmen Mr. Ergen’s strategy and level of investment with the newly acquired wireless and Blockbuster businesses; (4) core SG&A opexp post-TiVo lawsuits; (5) ’12 ARPU potential given DISH promised no programming price increase, perhaps instead a DVR increase; and (6) timing of programming renewals."
  
  
• Brean Murray Caret & Co. sees earnings of 71 cents per share. Brean is looking for 12,000 net adds, with gross adds of 704,000 and churn of 1.65 percent.
  
  
• Collins Stewart is looking for earnings of 75 cents per share. "While there are many unanswered questions relating to DISH’s long term strategy, the acquisitions of DBSD and TerreStar provide satellite assets and wireless spectrum." Collins sees net new subs of 11,000, gross adds of 784,000, and churn of 1.82 percent.

Stay tuned to StreetInsider.com's EPS Insider section to see our analysis of the highly-anticipated quarterly results within seconds of the release.

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