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Discovery's (DISCA) Q3 Earnings & Revenues Beat Estimates

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Discovery (DISCA - Free Report) reported third-quarter 2020 adjusted earnings of 81 cents per share, beating the Zacks Consensus Estimate by 19.1% but decreasing 6.9% year over year.

Revenues slid 4.4% year over year to $2.56 billion but beat the consensus mark by 2.1%.

This year-over-year decline was primarily attributed to a decrease in advertising (51% of revenues) revenues.

Top-Line Details

Advertising revenues dipped 7.6% year over year to $1.31 billion. Moreover, Distribution revenues fell 0.2% year over year to $1.20 billion. Other revenues were $56 million, down 12.5% from the year-ago quarter.

U.S. Networks (64.8% of revenues) revenues declined 3.8% on a year-over-year basis to $1.66 billion. Advertising revenues declined 7.7% while distribution revenues grew 2.2%.


Subscribers of Discovery’s fully distributed networks were 4% lower on a year-over-year basis. Total portfolio subscribers declined 6% year over year.

International Networks revenues (35.2% of revenues) slipped 5.1% year over year to $902 million. Advertising and distribution revenues were down 7.4% and 3.3%, respectively.

Notably, total share of viewing across the international portfolio in the third quarter increased 5% on average, with strong share growth in the United Kingdom, Germany, Italy and Norway.

Operating Details

In the third quarter, selling, general and administrative (SG&A) expenses decreased 4.1% from the year-ago quarter to $633 million. This year-over-year decline was due to 8% decrease in U.S. Networks SG&A and a 6% decrease in International Network’s SG&A.

Adjusted operating income before depreciation & amortization (“OIBDA”) decreased 15.3% from the year-ago quarter to $954 million. Excluding the foreign-exchange impact, OIBDA decreased 14%.

U.S. Networks adjusted OIBDA decreased 5% from the year-ago quarter to $951 million.

Moreover, International Networks adjusted OIBDA declined 46% from the year-ago quarter to $127 million. Excluding the forex impact, adjusted OIBDA was down 41%.

GAAP operating income declined 14.2% year over year to $531 million.

Balance Sheet & Cash Flow

As of Sep 30, 2020, cash & cash equivalents were $1.89 billion compared with $1.68 billion as of Jun 30, 2020.

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

Free cash flow plunged 97% year over year to $787 million.

Discovery repurchased shares worth $228 million in the reported quarter. Currently, $1.6 billion of the $2-billion authorization remains.

Zacks Rank & Stocks to Consider

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

DISH Network (DISH - Free Report) , TEGNA (TGNA - Free Report) and Delta Apparel (DLA - Free Report) are some better-ranked stocks in the broader consumer & discretionary sector. All the three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

DISH, TEGNA and Delta Apparel are set to report quarterly results on Nov 6, 9 and 19, respectively.


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