Discovery (DISCA) Lags Q1 Earnings, Revenues Estimates

Silver Spring, MD-based Discovery Communications, Inc. (NASDAQ:DISCA) performed disappointingly in the first quarter of 2017 reporting lower-than-expected earnings and revenues.The company’s earnings (on an adjusted basis) of 41 cents per share missed the Zacks Consensus Estimate of 49 cents. Also, the bottom line contracted 10.87% on a year-over-year basis due to higher costs.

Discovery’s first-quarter revenues of $1,613 million improved 3.3% on a year-over-year basis, despite the adverse impact of foreign currency movements. However, revenues missed the Zacks Consensus estimate of $1,631.4 million. The below-par earnings report disappointed investors. Consequently, shares of the company fell in early trading.

The increase in revenues witnessed in the U.S. Networks and International Networks units was somewhat mitigated by the disappointing performance of the Education and Other division. Quarterly adjusted operating income before depreciation and amortization (OIBDA) also increased 5% year over year.

Quarterly Performance

Revenues in the US Networks division climbed 3% to $829 million. Segmental growth was driven by a 5% rise in distribution revenues to $408 million. While advertising revenues climbed 1% to $405 million, revenues from other sources increased 7% to $16 million. Moreover, adjusted OIBDA was up 6% year over year for the segment. Adjusted OIBDA margin was 60% in the reported quarter compared with 59% a year ago.

In addition, international networks revenues climbed 5% to $747 million. While distribution revenues in the segment climbed 9% to $447 million, advertising revenues declined 1% to $282 million. Revenues from other sources increased 20% to $18 million. Moreover, adjusted OIBDA increased 7% on a year-over-year basis. Adjusted OIBDA margin was flat at 26%.

However, revenues from the Education and Other division decreased 16% to $37 million. The decline was primarily due to the timing of production deliveries at the company’s Studios production operations.

In fact, this Zacks Rank #4 (Sell) company exited 2016 with cash and cash equivalents of $267 million and $7,970 million of debt outstanding (non-current portion) compared with $300 million and $7, 841 million, respectively, at the end of 2016.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

During the quarter under review, the company shelled out $200 million on share buybacks.

Other Important Releases

Consumers interested in the broader Consumer-Discretionary space will now keenly await first-quarter earnings reports from the likes of Norwegian Cruise Line Holdings Ltd. (NASDAQ:NCLH) , China Lodging Group, Ltd. (NASDAQ:HTHT) and Laureate Education Inc. (NASDAQ:LAUR) . While Norwegian Cruise Line Holdings and China Lodging Group are scheduled to release results on May 10, Laureate Education will unveil results on May 11.

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