It has been about a month since the last earnings report for Discovery Communications . Shares have lost about 8.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Discovery due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Discovery Q3 Earnings Up Y/Y, Revenues Miss Estimates
Discovery reported third-quarter 2021 earnings of 24 cents per share, which decreased 54.5% year over year.
Revenues increased 23% year over year to $3.150 billion but missed the Zacks Consensus Estimate by 0.3%.
The consensus mark for earnings was pegged at 40 cents per share.
Advertising revenues increased 11.6% year over year to $1.46 billion. Distribution revenues increased 15% year over year to $1.38 billion. Other revenues were $313 million compared with $56 million reported in the year-ago quarter.
U.S. Networks (59% of revenues) revenues increased 12% on a year-over-year basis to $1.86 billion. Advertising revenues increased 5.3% while distribution revenues grew 20.8%.
Subscribers of Discovery’s fully distributed networks were 2% lower on a year-over-year basis. Total portfolio subscribers declined 4% year over year.
International Networks revenues (41.1% of revenues) surged 43.6% year over year to $1.30 billion. Advertising revenues and distribution revenues were up 27.9% and 7%, respectively.
Discovery ended the third quarter with 20 million paying direct-to-consumer subscribers.
In the third quarter, selling, general and administrative (SG&A) expenses surged 49.1% from the year-ago quarter to $944 million.
Adjusted operating income before depreciation & amortization (“OIBDA”) decreased 23.9% from the year-ago quarter to $726 million.
U.S. Networks adjusted OIBDA increased 1.3% from the year-ago quarter to $963 million. However, International Networks’ adjusted OIBDA loss was $79 million.
GAAP operating income declined 38% year over year to $329 million.
As of Sep 30, 2021, cash & cash equivalents were $3.12 billion compared with $2.8 billion as of Jun 30, 2021.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -11.24% due to these changes.
Currently, Discovery has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Discovery has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.