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Discovery Communications (DISCA) Tops Q1 Earnings Beat in Q1, Sales Lag

Silver Spring, MD-based Discovery Communications, Inc. DISCA reported mixed results for the first quarter of 2016. The company’s first-quarter 2016 earnings (on an adjusted basis) of 46 cents per share beat the Zacks Consensus Estimate by 4.5%. Earnings also improved over the year-ago figure by 10%.

Discovery Communications reported revenues of $1,561 million, up 2% on a year-over-year basis. Revenues narrowly missed the Zacks Consensus estimate of $1,565 million. Foreign currency movements impacted results excluding which the top line expanded 5% in the first quarter of 2016.

Total Distribution revenue was $801 million, up 5.7% year over year. Total Advertising revenue stood at $687 million, flat year over year. Other revenues declined 20.6% to $73 million. Quarterly expenses (on a reported basis) fell marginally to $1,072 million in the reported quarter. Quarterly adjusted operating income before depreciation and amortization (OIBDA) increased 2% year over year to $577 million.

The company exited the quarter with cash and cash equivalents of $333 million and $7,965 million of debt outstanding (non-current portion) compared with $390 million and $7,616 million, respectively, at the end of 2015. Meanwhile, the debt-to-capitalization ratio, at the end of the reported quarter, was 0.60 versus 0.58 at the end of 2015.

The company bought back shares worth $373 million in the reported quarter. The company expects 2016 earnings per share (on an adjusted basis) to grow at least in high teens. Free cash flow (excluding currency effects) is also expected to display growth in at least high teens.

Segmental Details

U.S. Networks

Total revenue came in at $807 million, up 8% year over year. Within this, Distribution revenues were up 8% year over year while Advertising revenues climbed 7% from the year-ago quarter. Meanwhile, other revenues rose 25% to $15 million. Adjusted OIBDA was up 11% year over year. Adjusted OIBDA margin stood at 59% in the reported quarter versus 57% a year ago.

International Networks

Total revenue came in at $711 million, down 3% year over year. Within this, Distribution revenues climbed 4% year over year while Advertising revenues fell 9%. Other revenues deteriorated 44% year over year. Furthermore, adjusted OIBDA decreased 14% on a year-over-year basis. Adjusted OIBDA margin stood at 26% versus 29% in the prior-year quarter.

Education

Total revenue at this segment was $44 million, down 19% year over year.

Zacks Rank & Key Picks

Discovery Communications currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the same space include Entercom Communications Corp. ETM, Gray Television Inc. GTN and Sirius XM Holdings SIRI. Entercom sports a Zacks Rank #1 (Strong Buy) while Gray Television and Sirius XM Holdings carry a Zacks Rank #2 (Buy).

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SIRIUS XM HLDGS (SIRI): Free Stock Analysis Report
 
ENTERCOM COMMUN (ETM): Free Stock Analysis Report
 
GRAY TELEVSN (GTN): Free Stock Analysis Report
 
DISCOVERY COM-A (DISCA): Free Stock Analysis Report
 
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