Discovery (DISCA) To Report Q4 Earnings: What's In Store?

Discovery (NASDAQ:DISCA) is set to report fourth-quarter 2019 results on Feb 27.

For the quarter, the Zacks Consensus Estimate has been steady at 95 cents over the past 30 days. The figure indicates growth of 28.4% from the year-ago reported figure.

The consensus mark for revenues, which is pegged at $2.87 billion, implies growth of 2.2% from the year-ago reported figure.

Notably, the company’s earnings missed the Zacks Consensus Estimate in two of the trailing four quarters, beating the same in the rest, the average positive surprise being 1.3%.

For the fourth quarter, Discovery expects U.S. advertising growth in the low-single digit range, which is a conservative view though. Moreover, U.S. affiliate growth is anticipated to increase 3-5%. Further, international advertising is expected to rise in the mid-single-digit band. Additionally, international affiliate is expected to be up in high-single digits.

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

Factors to Consider

Discovery’s fourth-quarter results are expected to reflect benefits from a strong content portfolio and an expanding international footprint.

The company is likely to have gained traction from the growing popularity of Food Network, primarily on solid content. This, in turn, might have aided U.S. advertising growth in the to-be-reported quarter.

Additionally, the top-line performance is expected to reflect solid monetization of digital assets and GOLFTV in the to-be-reported results.

Further, the increasing availability of its content across linear, digital over-the-top platforms like Hulu and Sling is expected to have improved the company’s competitive position in the streaming space and driven the top line.

International revenues are also likely to have got a boost from contribution (2-3 percentage points per Discovery) by the U.K. TV Lifestyle business.

Additionally, the company’s expanded footprint in Europe, courtesy of TVN in Poland, Dplay in the Nordics and Joyn in Germany (Discovery’s joint venture with ProSieben), is expected to have aided the top line in the region.

However, increased challenges in the markets of Mexico and Argentina might have hurt international advertising business in the to-be-reported quarter.

Moreover, the bottom-line performance is likely to reflect incremental spending on direct-to-consumer initiatives and International growth efforts in the upcoming quarterly release. Also, intensifying competition in the Pay-TV market is expected to have a bearing on the company’s fourth-quarter results.

What Our Model Says

According to the Zacks model, a company with a positive Earnings ESP along with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates. But that’s not the case here.

Discovery has a Zacks Rank #3 and an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

Here are some companies worth considering as per our model, these have the right combination of elements to beat on earnings this reporting cycle:

Guidewire Software (NYSE:GWRE) has an Earnings ESP of +15.39% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Marvell Technology (NASDAQ:MRVL) has an Earnings ESP of +5.70% and a Zacks Rank of 3.

ANSYS (NASDAQ:ANSS) has an Earnings ESP of +2.01% and is Zacks #3 Ranked.


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