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Are DirecTV's Earnings Enough?

Before the markets opened Thursday morning, DirecTV (NASDAQ: DTV) reported its fourth-quarter financial results as $1.53 in earnings per share (EPS) and $8.92 billion in revenue. That compared to Thomson Reuters consensus estimates of $1.40 in EPS and $8.91 billion in revenue. The fourth quarter from the previous year had $1.53 in EPS and $8.59 billion in revenue.

Also during the quarter, but not included in free cash flow, was a December 2014 debt issuance by DirecTV U.S. of $1.2 billion principal amount of 3.950% senior notes due in 2025.

In the fourth quarter, DirecTV U.S. revenues increased 5% to $7.14 billion, compared with the fourth quarter of 2013, and at the same time net subscriber additions were roughly 149,000.

The Latin America segment had revenues of $1.73 billion and approximately 118,000 in net subscriber additions.

Mike White, president and CEO of DirecTV, said:

Our fourth quarter results, although marked by challenging macroeconomic conditions in Latin America and a conscious decision to reinvest in our U.S. business, capped off another strong year of operations for DIRECTV. In Latin America, despite the macroeconomic headwinds, our DIRECTV and Sky brands attracted over 1.4 million net new customers — surpassing the 19 million cumulative subscriber mark by year-end. More importantly, even excluding Venezuela, DTVLA improved cash flow by over $400 million and generated positive cash flow for the year — easily surpassing our internal plans for the business.

The merger between DirecTV and AT&T Inc. (NYSE: T) is on track and is expected to be completed by the end of the first half of 2015. The decision of the Federal Communications Commission (FCC) comes down in March.

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AT&T’s CEO, Randall Stephenson, commented on the merger in late January:

Our transactions with DIRECTV and Mexican wireless companies Iusacell and Nextel Mexico will make us a very different company. We’ll be unique in the industry because we’ll be able to offer integrated capabilities across a diversified base of services, customers, geographies and technology platforms. After we close DIRECTV, our largest revenue stream will come from business-related accounts, followed by U.S. TV and broadband, U.S. consumer mobility and then international mobility and TV.

Shares of DirecTV closed Wednesday at $87.34. In early trading Thursday, shares were up fractionally at $87.43. The stock has a consensus analyst price target of $93.40 and a 52-week trading range of $72.28 to $89.46.