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Stock Analyst Update

Growing Cash Flow Bolsters USA Networks' Value

Diverse assets and management expertise add to appeal.


What Happened?
USA Networks (USAI) on Thursday reported a 21% increase in pro-forma revenue to $869 million for its operating companies, led by its information services businesses, which grew 38% to $210 million, and Home Shopping Network, which grew 20% to $352 million. EBITDA (earnings before interest, taxes, depreciation, and amortization), a proxy for cash flow, grew 22% for the operating companies. The firm's USA Network and Sci Fi Channel had slower revenue growth of 9% to $265 million, but even faster EBITDA growth of 32% to $110 million. The slower growth was the result of reduced advertising spending at USA Network.

What It Means for Investors
We continue to think that CEO Barry Diller's expertise in the entertainment industry makes USA Networks a solid investment, and the strong third quarter only bolsters our belief. With a diverse collection of assets, including USA Network, Ticketmaster (TMCS), and profitable Internet businesses, USA is positioned to prosper even in difficult economic times.

Richard Wilson does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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