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Discovery (DISCA) to Report Q1 Earnings: What's in the Cards?

Discovery DISCA is set to report first-quarter 2019 results on May 2.

The company’s earnings missed the Zacks Consensus Estimate in three of the trailing four quarters, the average negative surprise being 7.1%.

In the last reported quarter, Discovery reported adjusted earnings of 74 cents per share, which missed the Zacks Consensus Estimate by 7 cents. Revenues surged 50.7% year over year to $2.81 billion.

For first-quarter 2019, the company expects U.S. advertising growth to increase in the low-single-digit range, driven by price increases, and continued monetization of digital and GO products. The U.S. affiliate growth is expected to increase 3-4%.

However, International advertising growth is expected to decline high-single digits due to tough comparisons. International affiliate growth is expected to be flat.

Discovery, Inc. Price and EPS Surprise

Discovery, Inc. Price and EPS Surprise | Discovery, Inc. Quote

 

Meanwhile, the Zacks Consensus Estimate for first-quarter earnings has declined a penny to 79 cents over the past 30 days, indicating growth of 49.1% from the year-ago quarter’s reported figure. The consensus mark for revenues currently stands at $2.71 billion, suggesting growth of 17.6% from the figure reported in the year-ago quarter.

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

Key Factors to Consider

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

Furthermore, expanding sports coverage is a major driver. Discovery’s extensive Golf coverage through GOLFTV is supported by agreements with PGA Tour, Tiger Woods, European Tour and the Ladies European Tour.

Apart from GOLFTV, Discovery’s European sports network, EuroSport, has rights to prominent pro leagues in soccer and tennis, among others.

Moreover, increasing availability across linear, digital over-the-top (OTT) platforms like Hulu, and Sling is benefiting portfolio ratings. This is expected to drive the top line in the to-be-reported quarter.

However, weakness in International growth due to tough comparisons is a headwind. Moreover, higher restructuring costs related to Scripps acquisition are proving to be a drag on profitability.

PSG Deal Expands Cycling Footprint

In January, Discovery bought a 71% stake in digital sports media company, Play Sports Group (PSG). PSG is solely focused on cycling and tri-sports events, and supports cycling brands like Global Cycling Network, Global Mountain Bike Network and Global Triathlon Network.

Notably, PSG owns and operates eight cycling video channels generating more than 45 million video views every month, with 5.7 million social followers and 3.1 million subscribers.

The deal boosts Discovery’s plans to strengthen its footprint in the cycling media market that is worth $50 billion. It also expands the company’s sports subscriber base. Higher subscriptions and advertising revenues from PSG are likely to aid top-line growth in the first quarter.

What Our Model Says

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

Discovery has a Zacks Rank #3 but an Earnings ESP of -0.95%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks That Warrant a Look

Here are three stocks you may want to consider, as our model shows that these have the right combination of elements to deliver an earnings beat in this earnings season.

Electronic Arts EA has an Earnings ESP of +16.29% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

SeaWorld Entertainment SEAS has an Earnings ESP of +16.13% and a Zacks Rank #1.

Rent-A-Center RCII has an Earnings ESP of +21.98% and a Zacks Rank #1.

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Rent-A-Center, Inc. (RCII) : Free Stock Analysis Report
 
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