Discovery (DISCA) Q3 Earnings Decline, Revenues Rise Y/Y
Discovery DISCA reported third-quarter 2018 earnings of 16 cents per share that plunged 57.9% year over year. Higher restructuring and other charges associated with the integration of Scripps Networks as well as higher tax and interest expenses negatively impacted the bottom line.
Adjusted earnings, excluding the impact of amortization of acquisition-related intangible assets, net of tax was 52 cents per share. Moreover, adjusted earnings excluding restructuring and other charges were 79 cents and included $190 million (or 27 cents per share) of after-tax restructuring and other charges.
Revenues surged 57% year over year to $2.59 billion. Excluding the impact of foreign currency and the Scripps Networks Interactive, and The Enthusiast Network and the Oprah Winfrey Network transactions (collectively called “Transactions”), revenues increased 1%.
On a pro forma combined basis (if the “Transactions” had occurred on Jan 1, 2017), excluding the impact of foreign currency fluctuations, revenues inched up 2% from the year-ago quarter.
Distribution revenues (44.4% of revenues) increased 30.8% from the year-ago quarter to $1.15 billion. Advertising revenues (52.7%) surged 93.6% to $1.37 billion. Other revenues were $75 million compared with $65 million reported in the year-ago quarter.
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On a pro forma combined basis (if the “Transactions” had occurred on Jan 1, 2017), excluding the impact of foreign currency fluctuations, Distribution and Advertising revenues increased 2% and 4%, respectively. Other revenues plunged 27% year over year.
U.S. Networks (64.6% of revenues) surged 103.4% from the year-ago quarter to $1.67 billion. Excluding the impact of “Transactions”, revenues inched up 2%. On a pro forma combined basis, U.S. Networks' revenues grew 4%.
On a pro forma combined basis, subscribers to Discovery’s fully distributed networks declined 2%, while subscribers to the company’s total portfolio fell 5% in the quarter.
International Networks’ revenues (35.3% of revenues) increased 15% year over year $916 million. Excluding the impact of the acquisition of Scripps and currency effects, segment revenues increased 3%.
On a pro forma combined basis, excluding the impact of foreign currency fluctuations, international networks' revenues increased 2%.
Education revenues (0.1% of revenues) declined 90.6% year over year to $3 million in the reported quarter.
In the third quarter, adjusted operating income before depreciation & amortization (OIBDA) surged 81.6% from the year-ago quarter to $1.04 billion. Excluding the impact of the “Transactions” and foreign currency fluctuations, adjusted OIBDA increased 9%. U.S. Networks grew 6%, while international networks rallied 21%.
On a pro forma combined basis, excluding the impact of foreign currency, adjusted OIBDA increased 18%. U.S. Networks’ adjusted OIBDA grew 13%, while international networks’ adjusted OIBDA rose 27%.
As of Sep 30, 2018, cash & cash equivalents were $531 million compared with $392 million as of Jun 30, 2018.
Long-term debt was $15.83 billion, lower than $19.21 billion at the end of the previous quarter.
Zacks Rank & Stocks to Consider
Currently, Discovery carries a Zacks Rank #3 (Hold).
Comcast CMCSA, Rogers Communication RCI and Sirius XM SIRI are stocks worth considering in the broader consumer discretionary sector. All the three stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Long-term earnings growth rate for Comcast, Rogers and Sirisu XM is currently pegged at 12.5%, 5% and 15%, respectively.
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