Discovery Communications First-Quarter Earnings Rise
Discovery Communications on Tuesday reported higher first-quarter revenue and earnings as advertising and distribution revenue rose.
The cable networks powerhouse, led by CEO David Zaslav, posted revenue of nearly $1.2 billion, up 7 percent compared with $1.1 billion in the year-ago period. Earnings rose from $221 million to $231 million. Wall Street had been looking for $239 million though.
The latest figure was impacted by a range of factors in addition to what the company called "the strong underlying operating performance in the current year’s quarter." Among the items affecting the latest profit were a $92 million gain from the consolidation of results for Discovery Japan and $46 million of improved equity earnings, but also higher equity-based compensation expenses and a $59 million loss from "hedging activities primarily associated with the acquisition of the SBS Nordic operations."
Discovery recently closed the acquisition of the SBS Nordic business from German broadcaster ProSiebenSat.1.
Advertising revenue in the latest quarter grew from $453 million to $508 million driven by an 8 percent gain in the U.S., slightly below some analysts' forecasts, and 23 percent international growth. Affiliate fee revenue edged up from $576 million to $583 million as a 15 percent international gain outweighed a U.S. decline of 9 percent that was driven by the year-ago benefits of digital distribution deals.
"The significant operating momentum Discovery generated throughout 2012 continued unabated in the first quarter with more and more audiences around the globe viewing our unique programming," said Zaslav. "The sustained investment we have made in developing compelling content, along with the quality of our brands, translated into further market share gains, with record first-quarter viewership at our domestic networks and 16 percent audience growth across our international portfolio."
He added: "We have also completed several strategic acquisitions which we expect will further broaden our asset mix around the world and bolster our long-term growth prospects. 2013 is off to a great start and with continued focus on strong operating execution, we anticipate building on the financial success we have achieved over the last several years while delivering significant shareholder value."
"Discovery remains the company with arguably the best management team, most favorable business exposure of any TV programmer, and a clear focus on driving returns on capital invested," Pivotal Research Group analyst Brian Wieser wrote ahead of the earnings report. "While this is a stock we want to like, we continue to believe that the company's prospects are fully-priced in at current levels."
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