Discovery First-Quarter Earnings Exceed Estimates

The company, led by CEO David Zaslav, has seen improving ratings at the flagship Discovery Channel, and U.S. ad revenue rose a better-than-expected 1 percent in the quarter.

Discovery Communications, the company behind such cable networks as the Discovery Channel, TLC and OWN, on Tuesday reported its first-quarter financials, which exceeded expectations.

The company, led by CEO David Zaslav, reported earnings of $250 million, compared with $230 million in the year-ago period. Earnings per share of 37 cents, were up from 33 cents in the year-ago period. Revenue rose 9 percent to $1.54 billion as international increased 10 percent and U.S. revenue climbed 6 percent. U.S. advertising revenue rose a better-than-expected 1 percent as the company said "higher pricing was partially offset by lower delivery."

Wall Street had on average projected earnings of $227 million, or 35 cents per share.

Discovery said "the strong operating performance in the current year and decrease in stock-based compensation expense were partially offset by lower equity earnings, higher interest expense and higher restructuring charges." It said adjusted earnings per share, which excludes the impact of amortization of acquisition-related intangible assets, came in at 42 cents, compared with 38 cents in the same period a year ago. Adjusted earnings excluding currency effects rose even more as "changes in foreign currency exchange rates reduced first-quarter adjusted earnings per share by 6 percent," Discovery said.

Currency woes have affected all entertainment companies with big international operations as a strong dollar has meant that foreign revenue has translated into lower dollar figures.

"2015 is off to a great start, as our strategy of investing in and owning world-class content to leverage across our unparalleled global distribution platform continues to drive operating momentum and strong financial results," said Zaslav. "Despite facing a challenging U.S. marketplace and foreign currency headwinds, Discovery is successfully building market share, expanding our distribution and developing programming that resonates with audiences around the world."

He added: "I’m extremely pleased with our strong performance this quarter and the numerous opportunities Discovery has in the months and years ahead."

MKM Partners analyst Eric Handler had said in a report on Monday: "We see a stronger domestic outlook driven by Discovery Channel ratings gains offset by ongoing foreign exchange headwinds. Although Street forecasts are already reflecting many of these challenges, we do not see sufficient positive catalysts to become more constructive" on the stock.

Sanford C. Bernstein analyst Todd Juenger had said in an earnings preview: "Discovery benefitted from an unexpected surge in audiences mid-quarter (correlated with a large year-over-year increase in original programming hours, mostly for existing program franchises). Hence, we have increased our ad revenue forecast to -1 percent from -2 percent. Discovery has been telegraphing at investor conferences they may get close to flat year-over-year."

Twitter: @georgszalai