Discovery (DISCA) To Report Q2 Earnings: What's In Store?

Discovery (NASDAQ:DISCA) is set to report second-quarter 2019 results on Aug 6.

Notably, the company’s earnings missed the Zacks Consensus Estimate in three of the trailing four quarters, the average negative surprise being 9%.

In first-quarter 2019, adjusted earnings of 87 cents per share comfortably beat the Zacks Consensus Estimate by 8 cents. The company had reported earnings of 16 cents in the year-ago quarter.

Revenues increased 17.3% year over year to $2.71 billion but lagged the consensus mark.

Expectations for Q2

On a pro-forma constant-currency basis, for second-quarter 2019, Discovery expects U.S. advertising growth between 3% and 5%. Moreover, U.S. affiliate growth is anticipated to come in higher than the first quarter's 4% increase.

Further, international advertising is expected to grow mid-single digits for the second quarter. Additionally, international affiliate is expected to be up low-single digits.

The Zacks Consensus Estimate for second-quarter 2019 earnings has been steady at 99 cents over the past seven days. The figure indicates growth of 50% from the year-ago quarter’s reported figure.

The consensus mark for revenues, which is pegged at $2.88 billion, implies growth of 1.3% from the year-ago quarter’s reported figure.

Let’s see how things are shaping up for this announcement.

Factors to Consider

Discovery’s second-quarter 2019 results are expected to benefit from the strong content portfolio and expanding international footprint post the Scripps Networks buyout.

The top line is expected to benefit from strong domestic advertising growth, driven by improved ratings, healthy overall pricing and increase in TV Everywhere apps in the to-be-reported quarter. Moreover, solid monetization of digital assets and GOLFTV is a major growth driver.

Further, the increasing availability of its content across linear, digital over-the-top platforms like Hulu, AT&T (NYSE:T) Watch, Sling and YouTube must have improved the company’s competitive position in the streaming space. This is expected to drive the top line.

However, incremental spending on direct-to-consumer initiatives is expected to hurt profitability in the second quarter.

Further, unfavorable foreign exchange and intensifying competition in the Pay-TV market are expected to hurt overall growth.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. Stocks with a Zacks Rank #4 (Sell) or 5 (Strong Sell) are best avoided.

Discovery has a Zacks Rank #3 and an Earnings ESP of +5.05%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Other Stocks to Consider

Here are some companies, which, per our model, have the right combination of elements to post an earnings beat this quarter:

CACI International (NYSE:CACI) has an Earnings ESP of +4.02% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Cisco Systems (NASDAQ:CSCO) has an Earnings ESP of +1.53% and a Zacks Rank #2.

BrightView Holdings (NYSE:BV) has an Earnings ESP of +0.86% and a Zacks Rank #2.

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