Back to top

Analyst Blog

Discovery Communications Inc. (DISCA - Analyst Report) reported robust financial results for the second quarter of 2014. Both the top and the bottom line significantly outpaced the respective Zacks Consensus Estimate. This strong performance is primarily attributed to massive growth of the company’s International Networks, especially the advertising revenues.  

Quarterly net income came in at $379 million or $1.09 per share compared with $300 million or 82 cents per share in the year-ago quarter. Moreover, second-quarter adjusted earnings per share of $1.16 steered past the Zacks Consensus Estimate of 92 cents.

Quarterly total revenue of $1,610 million exhibited an improvement of 9.8% year over year and also surpassed the Zacks Consensus Estimate of $1,591 million. Total Distribution revenue was $692 million, up 4.5% year over year. Total Advertising revenue stood at $844 million, up 12.7% year over year. Other revenues were $74 million, up 32.1% year over year.

Quarterly operating expenses were $970 million against $918 million in the prior-year quarter. However, operating income was $640 million compared with $549 million in the prior-year quarter.

Quarterly adjusted operating income before depreciation and amortization (OIBDA) was $694 million, up 6.3% year over year. During the second quarter of 2014, Discovery repurchased 6.7 million shares for a total consideration of $503 million.

In the second quarter, Discovery generated $232 million of cash from operations compared with $339 million in the year-ago quarter. Free cash flow, in the reported quarter, was $202 million as against $311 million in the prior-year quarter.

At the end of the second quarter of 2014, Discovery had $372 million of cash and $7,074 million of debt outstanding as against $408 million of cash and $6,499 million of debt outstanding at the end of 2013. The debt-to-capitalization ratio, at the end of the reported quarter was 0.50 against 0.51 at end 2013.

U.S. Networks Segment

Total revenue stood at $777 million, down 2% year over year. Within this, Distribution revenues were $319 million, down 8% year over year. Advertising revenues were $446 million, up 5% from the prior-year quarter. Other revenues were $12 million, down 37% year over year. Adjusted OIBDA was $466 million, down 1% year over year. Adjusted OIBDA margin was 60%, flat year over year.

International Networks Segment

Total revenue came in at $802 million, up 23% year over year. Contained in this, Distribution revenues were $373 million, up 19% year over year. Advertising revenues stood at $397 million, up 23% year over year. Other revenues stood at $32 million, highlighting a two-fold rise year over year. Adjusted OIBDA was $297 million, up 19% year over year. Adjusted OIBDA margin was 37% as against 38% in the prior-year quarter.

Education Segment

Total revenue was $31 million, up 29% year over year. Adjusted OIBDA was $6 million, up 50% from the year-ago quarter. Adjusted OIBDA margin was 19% as against 17% in the prior-year quarter.

Financial Outlook

Discovery expects total revenue for fiscal 2014 in between $6.45 billion and $6.625 billion. Adjusted OIBDA is likely to range from $2.6 –$2.65 billion. Net income is anticipated between $1.225 billion and $1.275 billion.

Other Stocks to Consider

Discovery currently has a Zacks Rank #3 (Hold). Other better-ranked stocks in the broader Media/Entertainment industry which are worth mentioning include Pearson plc. (PSO - Snapshot Report), Gray Television Inc. (GTN - Snapshot Report) and Media General Inc. (MEG - Snapshot Report). Currently, Gray Television sports a Zacks Rank #1 (Strong Buy) while both Media general and Pearson carry a Zacks Rank #2 (Buy).

Please login to Zacks.com or register to post a comment.