Discovery Q1 beats expectations

U.S. ad revenue up 2%, company reiterates forecast

Discovery Communications posted better-than-expected first-quarter financials on Monday as it grew advertising revenue despite the recession. Shares soared 8.6% on the news to close at $20.21.

Cable networks have been holding up better in the downturn, and analysts have lauded Discovery for its continued solid financial performance.

Discovery's first-quarter profit multiplied to $119 million, compared with $34 million in the year-ago period. Revenue rose 1% to $817 million, with U.S. ad revenue up 2%. The company reiterated its 2009 forecasts.

"The growth Discovery delivered in the first quarter despite economic and foreign currency headwinds demonstrates the strength of our business model," Discovery president and CEO David Zaslav said. "Our stable and growing distribution revenue provides a unique resiliency in the face of economic hurdles."

Asked about the upcoming upfront ad market, Zaslav said during a conference call that "it really is an odd market" for a 25-year industry veteran like him given a lack of visibility and short-term buying.

"We don't really have a sense of the upfront," he said. "There really is no transparency."

But he said the company's "bouquet" of channels has allowed it to make up for weakness in advertising by financial services and auto giants for male-focused channels, such as the Discovery Channel, with solid trends for more female-skewing networks.

Analysts lauded the results, with Barclays Capital analyst Anthony DiClemente reiterating his "overweight" rating on the stock. "Discovery remains our top pick in entertainment," he said.