Thursday, February 20, 2020

Dish Beats Q4 Estimates, But All’s Not Well

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What’s happening: Dish Network Corp reported higher than expected fourth-quarter earnings. However, the company’s Pay-TV subscribers saw a massive decline, though not as much as the market was expecting. Revenue is ahead of expectations but still saw a decline in the quarter.

What happened: Shares of Dish Network rose by more than 2% during regular trading hours on Wednesday, only to end the day lower, as investors absorbed the details of the results and the decline in DISH TV subscribers. Investors were also reacting to comments made by Chairman Charlie Ergen about a likely merger with competitor DirecTV.

  • Dish Network posted a fourth-quarter profit of 69 cents a share, up from 64 cents per share for the same quarter period in the previous year and topping the consensus estimate of 59 cents a share.
  • Revenue came in at $3.24 billion, beating expectations of $3.15 billion, but representing a 2.1% year-on-year decline.

The company lost more than 5% of its DISH TV subscribers, versus the same quarter a year earlier. The number fell to 9.394 million. Although Sling TV’s subscribers grew versus the previous year, the streaming service posted its first quarterly decline, with a subscriber loss of 94,000. Total Pay-TV subscribers shrank by 194,000 in the quarter.

On a positive note, the satellite TV provider said its average revenue per user had risen by 1.7% year-on-year to $87.02.

Why it matters: Dish Network has been unable to retain Pay-TV subscribers in the recent past, as customers transition from traditional TV services to online streaming services. Although the company lost fewer-than-expected subscribers, the continuous decline is a worrying trend. Dish Network ended the year with a net loss of 511,000 subscribers, after having lost around 1.13 million subscribers in 2018.

The downward trend has forced the company to consider a merger with DirecTV. Dish Network’s Chairman Charlie Ergen said the merger is "inevitable" since “the growth in TV is not coming from linear TV providers.”

Dish Network is expected to benefit from T-Mobile’s acquisition of Sprint, which recently received the final regulatory clearance from a US federal judge. The acquisition deal includes Dish Network buying Sprint's prepaid wireless business and T-Mobile's wireless network. With the merger likely to close in April, Dish Network is expected to gain a foothold in the next generation of 5G wireless services. The company is also planning to construct its own 5G network with its partners, which includes Amazon.

What to watch: Dish Network has projected to spend between $250 million to $500 million to build its wireless network in 2020. The company is liable to pay $2.2 billion in fines if it misses the deadline for the new network. Dish Network has aggressive targets of providing 5G services to at least 70% of the US population by 2023.

The Markets Today

     

Asian markets are likely to be in focus today, amid a significant decline in the number of new confirmed cases of the coronavirus.​

Context: Asian markets opened on a higher note today, after China’s central bank lowered its loan prime rate. The Hubei province, which is the epicentre of the virus outbreak, reported only 349 new cases on Thursday, which is the biggest drop in the number of confirmed cases in almost a month.

Details: The People’s Bank of China cut its one-year loan prime rate (LPR) by 10 basis points to 4.05%, while the 5-year LPR was lowered by 5 basis points to 4.75%. The rate-cut came days after the central bank announced a reduction in the rate for medium-term loans. Chinese stocks gained momentum following the news in early trade, with the Shanghai Composite rising around 0.6% and the SZSE Component Index spiking over 1%.

China's National Health Commission reported at least 114 new deaths as of Wednesday end-of-day, bringing the total count to 2,118 nationwide. The new confirmed case figure of 394 came in significantly lower than the 1,749 figure reported the previous day.

Australia released unemployment data for January, which showed a rise in the jobless rate to a three-month high. The seasonally adjusted jobless rate rose to 5.3% in January, versus a December reading of 5.1%. Australian stocks also gained, with the S&P/ASX 200 up around 0.4%. The Australian dollar traded at $0.6655 versus the greenback after reaching a high of $0.6696.

Japanese shares gained the most among major Asian markets. The Nikkei 225 climbed over 1% with shares of index-heavyweight Softbank Group gaining around 4%.

What to watch: Australia will release its manufacturing and services PMI reports, while Japan’s inflation data will also be reported on Friday morning. Investors will be keeping a close eye on the region’s economic reports. The economic data from other countries will also play a significant role in the direction of the markets.

Other Markets: Most European indices closed higher on Wednesday, with the UK 100, German 30 and French 40 up 1.02%, 0.79% and 0.90%, respectively.

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German GfK consumer sentiment indicator and producer prices, Turkey’s consumer confidence index, French inflation rate, Italy's construction output, Spain’s balance of trade, UK retail sales, Russian retail sales, jobless rate and gross domestic product, Canada’s new housing price index and ADP employment change, Brazil’s industrial entrepreneur confidence index, Argentina’s consumer confidence index, Eurozone consumer confidence indicator, US initial jobless claims, Philadelphia Fed manufacturing index and index of leading economic indicators, Energy Information Administration’s weekly report on natural gas stocks and petroleum inventories as well as speeches by Federal Reserve Bank of Richmond President Thomas Barkin and ECB’s Guindos.