Wall Street’s breathing a sigh of relief this morning: Discovery’s share price is up 4.8% in pre-market trading after it crossed the low bar that analysts set for the cable networks company in Q1, which included a new distribution deal with Hulu and the consolidation of Discovery Family, formerly known as The Hub.
This morning it reported that net income at $250 million increased 8.7% vs the period last year on revenues of $1.54 billion, up 8.9%. The sales figure was right on target with analyst expectations. Earnings at 37 cents a share were two cents ahead of the Street’s forecasts.
Discovery favors an adjusted EPS figure that takes out goodwill amortization for the assets it acquired. That came in at 42 cents a share, up 11%.
“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,” CEO David Zaslav says. “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. I’m extremely pleased with our strong performance this quarter and the numerous opportunities Discovery has in the months and years ahead.”
At the U.S. Networks, revenues were up 6% to $749 million, largely due to the Hulu and Discovery Family changes. Ad sales — one of the most closely watched metrics ahead of upfront season — increased 1%, with higher pricing offsetting the company’s declining ratings. Some analysts thought the number would be either flat or down. But distribution revenues were up 13% to $362 million.
If you take Discovery Family out of the equation, then total revenues would have been up 3% and distribution would have been +8%.
The International Networks’ year-over-year comparisons were skewed by the May 2014 acquisition of a controlling stake in Eurosport International, and weakening overseas currencies vs the dollar. The operation reported revenues of $735 million, up 10%. with ad sales down 1% to $312 million and distribution fees up 17% to $396 million.
But if you strip out the impact of Eurosport and the currency changes, total sales would have been up 9%. Ad sales were up 12% in local currency terms, and distribution revenues were up 6%.