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Discovery's (DISCA) Q2 Earnings & Revenues Beat Estimates

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Discovery (DISCA - Free Report) reported second-quarter 2020 adjusted earnings of 77 cents per share, beating the Zacks Consensus Estimate by 2.7% but decreasing 21.4% year over year.

Revenues slid 11.9% year over year to $2.54 billion but beat the consensus mark by 1.2%.

This year-over-year decline was primarily attributed to a decrease in advertising (50.1% of revenues) revenues negatively impacted by the coronavirus pandemic.

Top-Line Details

Advertising revenues dipped 21.4% year over year to $1.27 billion. However, Distribution revenues climbed 1.6% year over year to $1.23 billion. Other revenues were $43 million, down 28.3% from the year-ago quarter.


U.S. Networks (69.1% of revenues) revenues declined 5.7% on a year-over-year basis to $1.76 billion. Advertising revenues declined 13.5% while distribution revenues grew 7.4%.

Total portfolio subscribers of Discovery’s fully distributed networks were 5% lower on a year-over-year basis. In the second quarter, Discovery's portfolio of networks in the United States gained more share in primetime than any other TV portfolio in each of the company’s targeted demographics, per Nielsen data.

International Networks revenues (30.8% of revenues) slipped 23.2% year over year to $783 million. Advertising and distribution revenues were down 40.8% and 6.2%, respectively.

Notably, total share of viewing across the international portfolio in the second quarter increased 4%, on average, with strong share growth in India, the United Kingdom and Italy.

Operating Details

In the second quarter, selling, general and administrative (SG&A) expenses decreased 10.4% from the year-ago quarter to $635 million.This year-over-year growth was due to 9% growth in U.S. Networks SG&A and a 13% increase in International Network SG&A.

Higher marketing expenses related to Discovery’s next-generation initiatives escalated SG&A year over year.

Adjusted operating income before depreciation & amortization (“OIBDA”) decreased 12% from the year-ago quarter to $1.13 billion. Excluding the foreign-exchange impact, OIBDA decreased 3%.

U.S. Networks adjusted OIBDA decreased 5.7% from the year-ago quarter to $1.06 billion.

Moreover, International Networks adjusted OIBDA declined 32.5% from the year-ago quarter to $193 million. Excluding the forex impact, adjusted OIBDA was down 2%.

GAAP operating income declined 21.3% year over year to $717 million.

Balance Sheet & Cash Flow

As of Jun 30, 2020, cash & cash equivalents were $1.68 billion compared with $1.45 billion as of Mar 31, 2020.

Moreover, as of Jun 30, 2020, long-term debt was $14.94 billion, higher than $15.27 billion as of Mar 31, 2020.

Free cash flow surged 47% year over year to $879 million.

Zacks Rank & Stocks to Consider

Currently, Discovery carries a Zacks Rank #3 (Hold).

Vista Outdoor (VSTO - Free Report) , LiveXLive Media (LIVX - Free Report) and TEGNA (TGNA - Free Report) are some better-ranked stocks in the broader consumer & discretionary sector. All the three stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

While both Vista Outdoor and LiveXLive Media are set to report quarterly results on Aug 6, TEGNA is scheduled to report on Aug 10.

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