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Why Is Warner Bros. Discovery (WBD) Up 5.7% Since Last Earnings Report?
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It has been about a month since the last earnings report for Warner Bros. Discovery (WBD - Free Report) . Shares have added about 5.7% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Warner Bros. 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.
Warner Bros. Discovery Q2 Earnings Miss, Ad Sales Fall Y/Y
Warner Bros. Discovery reported second-quarter 2024 loss of $4.07 per share, significantly wider than the Zacks Consensus Estimate of a loss of 18 cents. The company had incurred a loss of 51 cents in the year-ago quarter.
Revenues decreased 6.2% year over year to $9.71 billion, which missed the Zacks Consensus Estimate by 3.5%.
Advertising revenues decreased 3.5% year over year to $2.43 billion. Distribution revenues dropped 5% year over year to $4.87 billion. Content revenues declined 13.8% year over year to $2.1 billion. Other revenues were $295 million, up 14.3% from the year-ago quarter.
Top-Line Details
Studios (25.2% of total revenues) reported revenues of $2.44 billion, down 5.1% from the year-ago quarter. Revenues decreased 4% ex-FX from the prior-year quarter on a pro forma combined basis.
Within the segment, content revenues fell 6% ex-FX to $2.23 billion. TV revenues declined 27% ex-FX, primarily due to the timing of initial telecast productions as well as lower licensing sales.
Games revenues declined 41% ex-FX, primarily due to the weak performance of Suicide Squad: Kill the Justice League this year compared with the strong performance of Hogwarts Legacy in the prior year.
Theatrical revenues increased 19% ex-FX, primarily due to higher home entertainment revenues from Dune: Part Two, and higher box office carryover due to the performance of Godzilla x Kong: The New Empire, which was released at the end of March.
Other revenues increased 20% ex-FX, primarily driven by the June 2023 opening of Warner Bros. Studio Tour Tokyo.
Networks revenues (54.3% of total revenues) decreased 8.4% on a year-over-year basis to $5.27 billion. The AT&T SportsNet exit negatively impacted the growth rate by approximately 200 basis points (bps).
Within the segment, distribution revenues decreased 8% ex-FX, primarily due to a 9% decline in domestic linear pay-TV subscribers and an approximately 300 bps impact from the AT&T SportsNet exit, partially offset by a 5% increase in domestic affiliate rates.
Advertising revenues decreased 9% ex-FX, primarily due to a decline of 13% in domestic network audiences and the soft advertising market in the United States.
Content revenues increased 5% ex-FX, primarily driven by the timing of third-party licensing deals, partially offset by lower inter-segment content licensing to DTC.
DTC revenues (26.4% of revenues) declined 6% from the year-ago quarter to $2.56 billion.
Within the segment, distribution revenues increased 1% ex-FX, primarily driven by a 7% rise in subscribers following the launch of Max in Latin America in the first quarter of 2024 and in Europe in the second quarter of 2024, partially offset by continued domestic linear wholesale subscriber declines.
Advertising revenues surged 99% ex-FX, primarily driven by higher domestic Max engagement and ad-lite subscriber growth.
Content revenues plunged 70%, primarily due to lower volume of third-party licensing deals.
Subscriber Details
WBD ended second-quarter 2024 with 103.3 million global DTC subscribers, which increased 3.6 million sequentially.
Global DTC ARPU increased 4% ex-FX to $8.00, primarily driven by the growth of the ad tier domestically, along with the continued subscriber mix shift from linear wholesale to other distribution channels, partially offset by a rise in lower ARPU international markets.
Operating Details
In the second quarter, selling, general and administrative expenses decreased 3.9% from the year-ago quarter’s levels to $2.46 billion.
Adjusted EBITDA declined 16.5% from the year-ago quarter’s levels to $1.79 billion.
Second-quarter 2024 cash provided by operating activities came in at $1.22 billion compared with $2.01 billion in the prior-year period.
The company reported a free cash flow of $976 million compared with a free cash flow of $1.72 billion in the prior-year period.
The company reported an operating loss of $10.28 billion compared with an operating loss of $906 million in the year-ago quarter.
Net loss available to Warner Bros. Discovery was $10 billion, which includes a $9.1 billion non-cash goodwill impairment charge from the Networks segment, as well as $2.1 billion of pre-tax acquisition-related amortization of intangibles, content fair value step-up and restructuring expenses.
The goodwill impairment was triggered in response to the difference between market capitalization and book value, continued softness in the U.S. linear advertising market and uncertainty related to affiliate and sports rights renewals, including the NBA.
Balance Sheet
As of Jun 30, 2024, cash & cash equivalents were $3.61 billion compared with $3.78 billion as of Mar 31, 2024.
WBD repaid $1.8 billion of debt during the reported quarter and ended the quarter with $41.4 billion of gross debt and 4x net leverage. WBD purchased $3.4 billion of debt for $2.6 billion through a tender offer funded by cash on hand and a €1.5 billion senior notes offering.
As of Jun 30, 2024, the average duration of the company's outstanding debt was 13.7 years with an average cost of 4.6%.
The company maintains an undrawn $6 billion revolving credit facility.
Q2 Highlights
The company successfully launched Max and migrated subscribers to the new platform across Europe, including new market launches in France and Belgium. Max is now available in 65 countries and territories.
The 2024 CNN Presidential Debate was the highest-rated linear program in the history of CNN.
TNT Sports continued to strengthen its sports portfolio with multi-year domestic agreements for BIG EAST men's and women's college basketball, the French Open, Mountain West college football and the College Football Playoffs.
Adult Swim’s second-quarter primetime ratings grew 14% year over year, its third consecutive quarter of primetime growth.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
The consensus estimate has shifted 2557.14% due to these changes.
VGM Scores
Currently, Warner Bros. Discovery has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions looks promising. Notably, Warner Bros. Discovery has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Warner Bros. Discovery is part of the Zacks Broadcast Radio and Television industry. Over the past month, Fox (FOXA - Free Report) , a stock from the same industry, has gained 2.9%. The company reported its results for the quarter ended June 2024 more than a month ago.
Fox reported revenues of $3.09 billion in the last reported quarter, representing a year-over-year change of +2%. EPS of $0.90 for the same period compares with $0.88 a year ago.
Fox is expected to post earnings of $1.13 per share for the current quarter, representing a year-over-year change of +3.7%. Over the last 30 days, the Zacks Consensus Estimate has changed -5.5%.
Fox has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.
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Why Is Warner Bros. Discovery (WBD) Up 5.7% Since Last Earnings Report?
It has been about a month since the last earnings report for Warner Bros. Discovery (WBD - Free Report) . Shares have added about 5.7% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Warner Bros. 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.
Warner Bros. Discovery Q2 Earnings Miss, Ad Sales Fall Y/Y
Warner Bros. Discovery reported second-quarter 2024 loss of $4.07 per share, significantly wider than the Zacks Consensus Estimate of a loss of 18 cents. The company had incurred a loss of 51 cents in the year-ago quarter.
Revenues decreased 6.2% year over year to $9.71 billion, which missed the Zacks Consensus Estimate by 3.5%.
Advertising revenues decreased 3.5% year over year to $2.43 billion. Distribution revenues dropped 5% year over year to $4.87 billion. Content revenues declined 13.8% year over year to $2.1 billion. Other revenues were $295 million, up 14.3% from the year-ago quarter.
Top-Line Details
Studios (25.2% of total revenues) reported revenues of $2.44 billion, down 5.1% from the year-ago quarter. Revenues decreased 4% ex-FX from the prior-year quarter on a pro forma combined basis.
Within the segment, content revenues fell 6% ex-FX to $2.23 billion. TV revenues declined 27% ex-FX, primarily due to the timing of initial telecast productions as well as lower licensing sales.
Games revenues declined 41% ex-FX, primarily due to the weak performance of Suicide Squad: Kill the Justice League this year compared with the strong performance of Hogwarts Legacy in the prior year.
Theatrical revenues increased 19% ex-FX, primarily due to higher home entertainment revenues from Dune: Part Two, and higher box office carryover due to the performance of Godzilla x Kong: The New Empire, which was released at the end of March.
Other revenues increased 20% ex-FX, primarily driven by the June 2023 opening of Warner Bros. Studio Tour Tokyo.
Networks revenues (54.3% of total revenues) decreased 8.4% on a year-over-year basis to $5.27 billion. The AT&T SportsNet exit negatively impacted the growth rate by approximately 200 basis points (bps).
Within the segment, distribution revenues decreased 8% ex-FX, primarily due to a 9% decline in domestic linear pay-TV subscribers and an approximately 300 bps impact from the AT&T SportsNet exit, partially offset by a 5% increase in domestic affiliate rates.
Advertising revenues decreased 9% ex-FX, primarily due to a decline of 13% in domestic network audiences and the soft advertising market in the United States.
Content revenues increased 5% ex-FX, primarily driven by the timing of third-party licensing deals, partially offset by lower inter-segment content licensing to DTC.
DTC revenues (26.4% of revenues) declined 6% from the year-ago quarter to $2.56 billion.
Within the segment, distribution revenues increased 1% ex-FX, primarily driven by a 7% rise in subscribers following the launch of Max in Latin America in the first quarter of 2024 and in Europe in the second quarter of 2024, partially offset by continued domestic linear wholesale subscriber declines.
Advertising revenues surged 99% ex-FX, primarily driven by higher domestic Max engagement and ad-lite subscriber growth.
Content revenues plunged 70%, primarily due to lower volume of third-party licensing deals.
Subscriber Details
WBD ended second-quarter 2024 with 103.3 million global DTC subscribers, which increased 3.6 million sequentially.
Global DTC ARPU increased 4% ex-FX to $8.00, primarily driven by the growth of the ad tier domestically, along with the continued subscriber mix shift from linear wholesale to other distribution channels, partially offset by a rise in lower ARPU international markets.
Operating Details
In the second quarter, selling, general and administrative expenses decreased 3.9% from the year-ago quarter’s levels to $2.46 billion.
Adjusted EBITDA declined 16.5% from the year-ago quarter’s levels to $1.79 billion.
Second-quarter 2024 cash provided by operating activities came in at $1.22 billion compared with $2.01 billion in the prior-year period.
The company reported a free cash flow of $976 million compared with a free cash flow of $1.72 billion in the prior-year period.
The company reported an operating loss of $10.28 billion compared with an operating loss of $906 million in the year-ago quarter.
Net loss available to Warner Bros. Discovery was $10 billion, which includes a $9.1 billion non-cash goodwill impairment charge from the Networks segment, as well as $2.1 billion of pre-tax acquisition-related amortization of intangibles, content fair value step-up and restructuring expenses.
The goodwill impairment was triggered in response to the difference between market capitalization and book value, continued softness in the U.S. linear advertising market and uncertainty related to affiliate and sports rights renewals, including the NBA.
Balance Sheet
As of Jun 30, 2024, cash & cash equivalents were $3.61 billion compared with $3.78 billion as of Mar 31, 2024.
WBD repaid $1.8 billion of debt during the reported quarter and ended the quarter with $41.4 billion of gross debt and 4x net leverage. WBD purchased $3.4 billion of debt for $2.6 billion through a tender offer funded by cash on hand and a €1.5 billion senior notes offering.
As of Jun 30, 2024, the average duration of the company's outstanding debt was 13.7 years with an average cost of 4.6%.
The company maintains an undrawn $6 billion revolving credit facility.
Q2 Highlights
The company successfully launched Max and migrated subscribers to the new platform across Europe, including new market launches in France and Belgium. Max is now available in 65 countries and territories.
The 2024 CNN Presidential Debate was the highest-rated linear program in the history of CNN.
TNT Sports continued to strengthen its sports portfolio with multi-year domestic agreements for BIG EAST men's and women's college basketball, the French Open, Mountain West college football and the College Football Playoffs.
Adult Swim’s second-quarter primetime ratings grew 14% year over year, its third consecutive quarter of primetime growth.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
The consensus estimate has shifted 2557.14% due to these changes.
VGM Scores
Currently, Warner Bros. Discovery has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions looks promising. Notably, Warner Bros. Discovery has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Warner Bros. Discovery is part of the Zacks Broadcast Radio and Television industry. Over the past month, Fox (FOXA - Free Report) , a stock from the same industry, has gained 2.9%. The company reported its results for the quarter ended June 2024 more than a month ago.
Fox reported revenues of $3.09 billion in the last reported quarter, representing a year-over-year change of +2%. EPS of $0.90 for the same period compares with $0.88 a year ago.
Fox is expected to post earnings of $1.13 per share for the current quarter, representing a year-over-year change of +3.7%. Over the last 30 days, the Zacks Consensus Estimate has changed -5.5%.
Fox has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.