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Discovery Communications Earnings Hit by Currency Woes

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Silver Spring, MD-based Discovery Communications, Inc. (DISCA - Free Report) reported lackluster results in the fourth quarter of 2015, missing on earnings as well as revenues.

The quarter’s earnings (on an adjusted basis) of 38 cents per share were well short of the Zacks Consensus Estimate of 46 cents. The earnings miss was attributable to the lower-than-expected revenues reported by the company in the final quarter of 2015. Moreover, earnings were lower than the year-ago figure by 11.6%. Excluding the impact of foreign currency, the bottom line grew 12% on a year–over-year basis.

Discovery Communications reported quarterly revenues of $1,646 million, down 2% on a year-over-year basis. Revenues also lagged the Zacks Consensus estimate of $1,667 million. Foreign currency movements adversely impacted results. Excluding the impact of foreign currency, the top line expanded 5% in the final quarter of 2015.

Total Distribution revenue was $759 million, up 1.9% year over year. Total Advertising revenue stood at $804 million, down 3.3%. Other revenues declined 17% to $83 million. Quarterly expenses (on a reported basis) fell marginally to $1,205 million in the final quarter of 2015. Quarterly adjusted operating income before depreciation and amortization (OIBDA) was $574 million, down 10% year over year.

At the end of 2015, Discovery Communications generated $1,277 million of cash from operations compared with $1,318 million at 2014-end. Free cash flow in 2015 was $1,174 million versus $1,198 million a year ago.

The company exited the quarter with cash and cash equivalents of $390 million and $7,616 million of debt outstanding (non-current portion) compared with $367 million and $6,002 million, respectively, at the end of 2014. Meanwhile, the debt-to-capitalization ratio, at the end of the reported quarter, was 0.58 versus 0.52 at the end of 2014.

Segmental Details

U.S. Networks

Total revenue came in at $787 million, up 6% year over year. Within this, Distribution revenues were up 7% year over year while Advertising revenues climbed 5% from the year-ago quarter. Meanwhile, other revenues were flat year over year. Adjusted OIBDA was up 1% year over year. Adjusted OIBDA margin stood at 52% in the reported quarter versus 54% a year ago.

International Networks

Total revenue came in at $816 million, down 8% year over year. Within this, Distribution revenues dropped 2% year over year while Advertising revenues fell 11%. Other revenues deteriorated 31% year over year. Furthermore, adjusted OIBDA decreased 20% year over year. Adjusted OIBDA margin stood at 32% versus 37% in the prior-year quarter.

Education

Total revenue at this segment came in at $43 million, flat year over year.

Annual Results

For full-year 2015, the company’s earnings (on an adjusted basis) declined 4.3% to $1.76 per share. Revenues climbed 2% to $6,934 million in 2015. The Zacks Consensus Estimate hints at earnings of $1.84 per share on revenues of $6,412 million. The company bought back shares worth $951 million in 2015.

Zacks Rank

Discovery Communications currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the same space include Entercom Communications Corp. (ETM - Free Report) , Grupo Televisa (TV - Free Report) and AMC Networks Inc. (AMCX - Free Report) . AMC Networks holds a Zacks Rank #2 (Buy) while Entercom and Grupo Televisa carry a Zacks Rank #1 (Strong Buy).

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