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Discovery (DISCA) to Report Q2 Earnings: What's in Store?

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Discovery DISCA is set to report second-quarter 2021 results on Aug 3.

For the quarter, the Zacks Consensus Estimate for earnings has decreased 1.8% to 55 cents per share over the past 30 days. The figure indicates a 28.5% decline from the year-ago reported figure.

The consensus mark for revenues, pegged at $2.97 billion, implies 16.9% increase from the year-ago reported figure.

Notably, the company’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters, missing the same in the remaining one, the average negative surprise being 9.9%.

Let’s see how things have shaped up for this announcement.

Discovery, Inc. Price and EPS Surprise

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

Discovery, Inc. price-eps-surprise | Discovery, Inc. Quote

Factors to Consider

Discovery’s second-quarter 2021 performance is expected to have benefited from an improved ad-spending environment. The company generates over 50% of its revenues from advertising. Sequential recovery is expected to have aided Discovery’s top-line growth in the to-be-reported quarter.

Moreover, Discovery boasts a strong non-fiction content portfolio. The increasing availability of its content across linear, digital over-the-top platforms like Hulu and Sling TV is expected to have improved traffic. Strong demand for unscripted content is expected to have aided Dplay.

The company is expected to have benefited from solid viewership of multiple channels, including Discovery Channel, Animal Planet, Food Network, HGTV, MotorTrend, Science, TLC, ID, Oprah, Eurosport, the Cooking Channel and UKTV Lifestyle.

Resumption of sporting events globally is expected to have boosted growth for Eurosport, Discovery’s primary sports-oriented linear network.

Moreover, discovery+ is off to an impressive start. Discovery ended the first quarter with 13 million paying direct-to-consumer (DTC) subscribers. It launched discovery+ on Comcast Xfinity and Amazon Prime Video Channels in the United States, Starzplay in MENA, and Samsung Smart TVs and Amazon Fire TV devices in the United Kingdom and Ireland. This is expected to have aided top-line growth in the to-be-reported quarter.

International revenues are also likely to have got a boost from the U.K. TV Lifestyle business.

However, incremental spending on direct-to-consumer initiatives is expected to have hurt profitability in the second quarter.

Further, unfavorable foreign exchange and intensifying competition in the Pay-TV market are expected to hurt overall growth.

Key Announcements in Q2

On Jun 1, Discovery announced that Warner Bros. Discovery will be the new name of the proposed standalone global entertainment company that will emerge from the combination of AT&T T-division WarnerMedia and Discovery assets. The companies expect the merger to be completed in mid-2022.

The combined WarnerMedia-Discovery is expected to generate DTC revenues of more than $15 billion in 2023. Moreover, cost synergies are expected to cross $3 billion per year.

Markedly, the combined company is likely to have more than 200K hours of video content along with premium sports rights in the United States, Europe and Latin America. The service will be available in more than 220 countries and 50 languages.

What Our Model Says

Per the Zacks model, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here.

Discovery has an Earnings ESP of -14.39% and a Zacks Rank #3. 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 as these have the right combination of elements to beat on earnings this reporting cycle:

Avnet, Inc. AVT has an Earnings ESP of +9.82% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Opendoor Technologies Inc. OPEN has an Earnings ESP of +2.86% and a Zacks Rank #2.


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