We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Discovery's (DISCA) Q1 Earnings Miss Mark, Revenues Fall Y/Y
Read MoreHide Full Article
Discovery reported first-quarter 2020 adjusted earnings of 87 cents per share, missing the Zacks Consensus Estimate by 1.4% but increasing 2.4% year over year.
Revenues slid 1% year over year to $2.68 billion and also lagged the consensus mark by 1.8%.
This year-over-year decline was attributed to a decrease in advertising (52.3% of revenues) and flat distribution (45.7% of revenues) revenues.
Top-Line Details
Advertising revenues dipped 0.9% year over year to $1.40 billion. Distribution revenues were unchanged at $1.22 billion. Other revenues were $58 million, down 14.7% from the year-ago quarter.
U.S. Networks (65.5% of revenues) revenues stayed at $1.76 billion on a year-over-year basis. Advertising revenues were unchanged while distribution revenues grew 1.6%.
Total portfolio subscribers for March 2020 were 6% lower than the level in March 2019 while subscribers to the fully distributed networks declined 4%.
International Networks revenues (34.5% of revenues) slipped 3% year over year to $923 million. Advertising and distribution revenues were down 4.3% and 2.3%, respectively.
Solid contributions from the UKTV Lifestyle Business and growth in next-generation initiatives aided advertising revenues. However, discontinuation of certain pay-TV distribution agreements in the Nordics and the impact of coronavirus in key advertising markets hurt top-line growth.
However, excluding the foreign exchange impact, International Networks revenue growth was flat as advertising revenues remained unchanged while distribution revenues inched up 1% on a year-over-year basis.
Distribution increased owing to content licensing arrangements and higher affiliate rates in Latin America as well as monetization of Discovery’s next-generation initiatives in Europe and Asia.
Notably, total share of viewing across the international portfolio in the first quarter increased 4%, on average.
Operating Details
In the first quarter, selling, general and administrative (SG&A) expenses increased 3% from the year-ago quarter to $645 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 4% from the year-ago quarter to $1.11 billion. Excluding the foreign exchange impact, OIBDA decreased 3%.
U.S. Networks adjusted OIBDA decreased 4.2% from the year-ago quarter to $1.02 billion.
Moreover, International Networks adjusted OIBDA declined 5.5% from the year-ago quarter to $207 million. Excluding the forex impact, adjusted OIBDA was down 2%.
GAAP operating income inched up 0.6% year over year to $779 million.
Balance Sheet & Cash Flow
As of Mar 31, 2020, cash & cash equivalents were $1.45 billion compared with $1.55 billion as of Dec 31, 2019.
Moreover, as of Mar 31, 2020, long-term debt was $15.27 billion, higher than $14.81 billion as of Dec 31, 2019.
On Mar 12, 2020, Discovery withdrew $500 million under its $2.5 billion revolving credit facility. Additionally, on Apr 30, the company inked a deal with its lender group, led by Bank of America to amend certain provisions of its revolving credit facilities including resetting the Maximum Consolidated Leverage Ratio to 5.5X from the third quarter of 2020 through the first quarter of 2021.
Free cash flow plunged 54% year over year to $230 million.
Moreover, in February 2020, the company authorized an additional common stock repurchase program worth $2 billion. Discovery completed its erstwhile $1-billion repurchase authorization and bought back an additional $159 million under its new $2-billion repurchase plan.
Key Development in Q1
Discovery and Amazon (AMZN - Free Report) announced an expanded collaboration that will provide a complimentary one-year subscription to Food Network Kitchen for all Amazon Fire TV and Fire Tablet customers in the United States.
Both companies are scheduled to report their respective quarterly results on May 7.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.
This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
Image: Bigstock
Discovery's (DISCA) Q1 Earnings Miss Mark, Revenues Fall Y/Y
Discovery reported first-quarter 2020 adjusted earnings of 87 cents per share, missing the Zacks Consensus Estimate by 1.4% but increasing 2.4% year over year.
Revenues slid 1% year over year to $2.68 billion and also lagged the consensus mark by 1.8%.
This year-over-year decline was attributed to a decrease in advertising (52.3% of revenues) and flat distribution (45.7% of revenues) revenues.
Top-Line Details
Advertising revenues dipped 0.9% year over year to $1.40 billion. Distribution revenues were unchanged at $1.22 billion. Other revenues were $58 million, down 14.7% from the year-ago quarter.
U.S. Networks (65.5% of revenues) revenues stayed at $1.76 billion on a year-over-year basis. Advertising revenues were unchanged while distribution revenues grew 1.6%.
Discovery, Inc. Price, Consensus and EPS Surprise
Discovery, Inc. price-consensus-eps-surprise-chart | Discovery, Inc. Quote
Total portfolio subscribers for March 2020 were 6% lower than the level in March 2019 while subscribers to the fully distributed networks declined 4%.
International Networks revenues (34.5% of revenues) slipped 3% year over year to $923 million. Advertising and distribution revenues were down 4.3% and 2.3%, respectively.
Solid contributions from the UKTV Lifestyle Business and growth in next-generation initiatives aided advertising revenues. However, discontinuation of certain pay-TV distribution agreements in the Nordics and the impact of coronavirus in key advertising markets hurt top-line growth.
However, excluding the foreign exchange impact, International Networks revenue growth was flat as advertising revenues remained unchanged while distribution revenues inched up 1% on a year-over-year basis.
Distribution increased owing to content licensing arrangements and higher affiliate rates in Latin America as well as monetization of Discovery’s next-generation initiatives in Europe and Asia.
Notably, total share of viewing across the international portfolio in the first quarter increased 4%, on average.
Operating Details
In the first quarter, selling, general and administrative (SG&A) expenses increased 3% from the year-ago quarter to $645 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 4% from the year-ago quarter to $1.11 billion. Excluding the foreign exchange impact, OIBDA decreased 3%.
U.S. Networks adjusted OIBDA decreased 4.2% from the year-ago quarter to $1.02 billion.
Moreover, International Networks adjusted OIBDA declined 5.5% from the year-ago quarter to $207 million. Excluding the forex impact, adjusted OIBDA was down 2%.
GAAP operating income inched up 0.6% year over year to $779 million.
Balance Sheet & Cash Flow
As of Mar 31, 2020, cash & cash equivalents were $1.45 billion compared with $1.55 billion as of Dec 31, 2019.
Moreover, as of Mar 31, 2020, long-term debt was $15.27 billion, higher than $14.81 billion as of Dec 31, 2019.
On Mar 12, 2020, Discovery withdrew $500 million under its $2.5 billion revolving credit facility. Additionally, on Apr 30, the company inked a deal with its lender group, led by Bank of America to amend certain provisions of its revolving credit facilities including resetting the Maximum Consolidated Leverage Ratio to 5.5X from the third quarter of 2020 through the first quarter of 2021.
Free cash flow plunged 54% year over year to $230 million.
Moreover, in February 2020, the company authorized an additional common stock repurchase program worth $2 billion. Discovery completed its erstwhile $1-billion repurchase authorization and bought back an additional $159 million under its new $2-billion repurchase plan.
Key Development in Q1
Discovery and Amazon (AMZN - Free Report) announced an expanded collaboration that will provide a complimentary one-year subscription to Food Network Kitchen for all Amazon Fire TV and Fire Tablet customers in the United States.
Zacks Rank & Stocks to Consider
Discovery has a Zacks Rank #3 (Hold). DISH Corporation and Roku (ROKU - Free Report) are some better-ranked stocks in the broader consumer & discretionary sector, both carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Both companies are scheduled to report their respective quarterly results on May 7.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.
This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
See their latest picks free >>