Dish Network (DISH)
Some companies have the hardest time keeping sales and profit moving in the same direction. Most people would assume that if you are selling more of the product then profits should be increasing as well, but that is not always the case. Dish Network has definitely been a victim of this during the last few quarters. The satellite provider reported that fourth-quarter profit declined almost 18% despite the amount of subscribers to its services going up. Why is the company having such a hard time pushing profits in the right direction? Will this mismatch of sales and profit become the standard pattern for future quarters?
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Stock Analysis
Similar to other companies, Dish Network is still trying to pull together the pieces after making it through The Great Recession. Sales dwindled last year as consumers slashed their spending and sought out better bargains. The wheels have finally started to turn in the right direction in terms of subscribers. Dish added 249,000 subscribers during the fourth quarter. The company was able to achieve this by rolling out a number of new advertising campaigns that targeted some subscribers from its rivals. The company’s “Why Pay More” ads asserted that its main rival, DirecTV, charges $24 more for the same service from Dish. The ads were very appealing to cash-strapped consumers who are still pinching pennies to deal with rising costs and record unemployment. DirecTV launched a lawsuit against Dish claiming that the ads were false, but lost a court injunction to have Dish stop airing the ads.
While subscribers went up, profits on the other hand went down. Dish reported a profit of $179 million, or 40 cents a share, down from $217 million, or 48 cents a share, a year earlier. The earnings actually came in better-than-expected. Analysts projected that fourth-quarter profit would come in at 32 cents a share. The company is still tweaking its strategy to get subscribers and profits on the same road to recovery. Nonetheless, profits ended up in a much better place than previously predicted.
Future performance at Dish is still a very foggy subject. The company is in an ongoing war with rivals to deliver the best products to consumers at an appealing price. The company’s aggressive advertising blitz paid off during the fourth-quarter, but Dish will definitely have to come with something new if they are looking to maintain the increases in subscribers in future quarters. Hopefully Dish will be able to hold onto its current level of subscribers while adding additional ones. This combination will likely give the company the boost it needs to push profits into positive territory. Dish rose 93 cents, or 4.7 percent, to $20.90 during morning trading. The shares had lost 3.9 percent this year before today.
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