A month has gone by since the last earnings report for Discovery Communications . Shares have added about 32.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Discovery due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Discovery's Q3 Earnings & Revenues Beat Estimates
Discovery reported third-quarter 2020 adjusted earnings of 81 cents per share, beating the Zacks Consensus Estimate by 19.1% but decreasing 6.9% year over year.
Revenues slid 4.4% year over year to $2.56 billion but beat the consensus mark by 2.1%.
This year-over-year decline was primarily attributed to a decrease in advertising (51% of revenues) revenues.
Top-Line Details
Advertising revenues dipped 7.6% year over year to $1.31 billion. Moreover, Distribution revenues fell 0.2% year over year to $1.20 billion. Other revenues were $56 million, down 12.5% from the year-ago quarter.
U.S. Networks (64.8% of revenues) revenues declined 3.8% on a year-over-year basis to $1.66 billion. Advertising revenues declined 7.7% while distribution revenues grew 2.2%.
Subscribers of Discovery’s fully distributed networks were 4% lower on a year-over-year basis. Total portfolio subscribers declined 6% year over year.
International Networks revenues (35.2% of revenues) slipped 5.1% year over year to $902 million. Advertising and distribution revenues were down 7.4% and 3.3%, respectively.
Notably, total share of viewing across the international portfolio in the third quarter increased 5% on average, with strong share growth in the United Kingdom, Germany, Italy and Norway.
Operating Details
In the third quarter, selling, general and administrative (SG&A) expenses decreased 4.1% from the year-ago quarter to $633 million. This year-over-year decline was due to 8% decrease in U.S. Networks SG&A and a 6% decrease in International Network’s SG&A.
Adjusted operating income before depreciation & amortization (“OIBDA”) decreased 15.3% from the year-ago quarter to $954 million. Excluding the foreign-exchange impact, OIBDA decreased 14%.
U.S. Networks adjusted OIBDA decreased 5% from the year-ago quarter to $951 million.
Moreover, International Networks adjusted OIBDA declined 46% from the year-ago quarter to $127 million. Excluding the forex impact, adjusted OIBDA was down 41%.
GAAP operating income declined 14.2% year over year to $531 million.
Balance Sheet & Cash Flow
As of Sep 30, 2020, cash & cash equivalents were $1.89 billion compared with $1.68 billion as of Jun 30, 2020.
Moreover, as of Jun 30, 2020, long-term debt was $14.94 billion, higher than $14.94 billion as of Jun 30, 2020.
Free cash flow plunged 97% year over year to $787 million.
Discovery repurchased shares worth $228 million in the reported quarter. Currently, $1.6 billion of the $2-billion authorization remains.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted 9.2% due to these changes.
VGM Scores
At this time, Discovery has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Discovery has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Discovery (DISCA) Up 32.9% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Discovery Communications . Shares have added about 32.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Discovery due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Discovery's Q3 Earnings & Revenues Beat Estimates
Discovery reported third-quarter 2020 adjusted earnings of 81 cents per share, beating the Zacks Consensus Estimate by 19.1% but decreasing 6.9% year over year.
Revenues slid 4.4% year over year to $2.56 billion but beat the consensus mark by 2.1%.
This year-over-year decline was primarily attributed to a decrease in advertising (51% of revenues) revenues.
Top-Line Details
Advertising revenues dipped 7.6% year over year to $1.31 billion. Moreover, Distribution revenues fell 0.2% year over year to $1.20 billion. Other revenues were $56 million, down 12.5% from the year-ago quarter.
U.S. Networks (64.8% of revenues) revenues declined 3.8% on a year-over-year basis to $1.66 billion. Advertising revenues declined 7.7% while distribution revenues grew 2.2%.
Subscribers of Discovery’s fully distributed networks were 4% lower on a year-over-year basis. Total portfolio subscribers declined 6% year over year.
International Networks revenues (35.2% of revenues) slipped 5.1% year over year to $902 million. Advertising and distribution revenues were down 7.4% and 3.3%, respectively.
Notably, total share of viewing across the international portfolio in the third quarter increased 5% on average, with strong share growth in the United Kingdom, Germany, Italy and Norway.
Operating Details
In the third quarter, selling, general and administrative (SG&A) expenses decreased 4.1% from the year-ago quarter to $633 million. This year-over-year decline was due to 8% decrease in U.S. Networks SG&A and a 6% decrease in International Network’s SG&A.
Adjusted operating income before depreciation & amortization (“OIBDA”) decreased 15.3% from the year-ago quarter to $954 million. Excluding the foreign-exchange impact, OIBDA decreased 14%.
U.S. Networks adjusted OIBDA decreased 5% from the year-ago quarter to $951 million.
Moreover, International Networks adjusted OIBDA declined 46% from the year-ago quarter to $127 million. Excluding the forex impact, adjusted OIBDA was down 41%.
GAAP operating income declined 14.2% year over year to $531 million.
Balance Sheet & Cash Flow
As of Sep 30, 2020, cash & cash equivalents were $1.89 billion compared with $1.68 billion as of Jun 30, 2020.
Moreover, as of Jun 30, 2020, long-term debt was $14.94 billion, higher than $14.94 billion as of Jun 30, 2020.
Free cash flow plunged 97% year over year to $787 million.
Discovery repurchased shares worth $228 million in the reported quarter. Currently, $1.6 billion of the $2-billion authorization remains.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted 9.2% due to these changes.
VGM Scores
At this time, Discovery has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Discovery has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.