EchoStar Earnings Preview: Strong EPS and Sales Results Expected
EchoStar (NYSE: SATS) is scheduled to report third-quarter 2011 results Monday, November 7. EchoStar, which was spun off from Dish Network (NASDAQ: DISH) in January of 2008, reported a profitable second quarter, its fourth in a row. The question is whether the company can reverse that quarter's decline in revenues.
The consensus third-quarter forecast calls for EchoStar to report earnings of $0.38 per share, which would be a nice increase from $0.06 in the same quarter of last year. That EPS estimate is unchanged from 60 days ago. Note though that the company fell short of consensus EPS estimates in two of the past six quarters.
Analysts also expect the company to post revenues of $754.9 million, or a 24.4% increase from a year ago. Looking ahead to the current quarter, revenues are anticipated to jump more than 40% year over year. And for the full year, the forecast so far calls for revenues to be 8.0% higher, with per-share earnings up 6.0% from a year ago.
EchoStar produces and markets digital set-top boxes and related products for direct-to-home satellite and cable providers. The Englewood, Colo.-based company also provides digital broadcast operations and other services primarily to DISH Network, but also to the U.S. government service providers, state agencies, Internet service providers, and broadcast news organizations. EchoStar owns or leases 10 in-orbit satellites and related FCC licenses. The company currently has a market cap of $2.3 billion.
During the three months that ended in September, the company agreed to be a lender to bankrupt mobile satellite network operator TerreStar Networks, and EchoStar Europe launched a set-top box that supports the Android OS. More recently, EchoStar announced that its chief financial officer would be stepping down.
The company has a P/E ratio of 10.9, which is less than the industry average. The operating margin of 5.8% is higher than the industry average. And the company's cash on hand more than doubled in the most recently reported quarter. Short interest is less than 1% of the float. Two of two analysts surveyed recommend buying shares, and they have a mean price target on the stock of $41 per share. That gives the stock plenty of room to run from the current price of $26.44.
The share price suffered a steep decline in July and August, but the stock is up almost 34% from a recent 52-week low. Shares are trading now about 6% higher than at the beginning of the year. The share price is above the 50-day moving average. But over the past six months, the stock has underperformed larger competitors Cisco Systems (NASDAQ: CSCA) and Motorola Solutions (NYSE: MSI), as well as the broader markets.
Bullish: Investors interested in exchange traded funds invested in EchoStar might want to consider the following trades:
- SPDR S&P Telecom (NYSE: XTL) is almost 18% higher than a month ago.
- First Trust Technology AlphaDEX (NYSE: FXL) is more than 10% higher than a month ago.
- Guggenheim Spin-Off (NYSE: CSD) is more than 8% higher than a month ago.
Bearish: Traders may want to consider these alternative positions:
- Cisco Systems (NASDAQ: CSCO) is almost 30% higher than three months ago.
- Motorola Solutions (NYSE: MSI) is more than 17% higher than three months ago.
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