Discovery Beats Q4 Expectations On Earnings, But Not On Revenues

Like a lot of media companies this earnings season, Discovery Communications just reported mixed results in its Q4 report with revenues falling short of analyst expectations, but with an earnings beat.

The company reported net income of $304 million, up 38.8% vs the period last year, on revenues of $1.67 billion, up 1.6%. The Street thought that revenues would hit $1.69 billion.

But earnings, at 52 cents a share, exceeded expectations for 47 cents.

“Discovery’s diversified set of nonfiction, sports and kids’ entertainment brands, and strong strategic positioning continued to drive attractive distribution agreements, helping to deliver solid operating and financial results in 2016,” CEO David Zaslav says. “As we begin 2017, we will continue to invest in our premier global IP and brands to nourish fans across all screens, all platforms and all services to drive shareholder value and propel our business for years to come amid the rapidly changing media landscape.”

Higher ad prices and affiliate rates offset what the company calls a “slight decline in subscribers” and lower ratings at the U.S. Networks. Earnings (measured by adjusted Operating Income Before Depreciation and Amortization) increased 9% to $447 million with revenues up 3% to $812 million.

Ad sales were up 1% to $421 million while distribution revenues increased 6% to $375 million.

But the International Networks struggled with adjusted OIBDA down 12% to $231 million on revenues of $819 million, basically flat.

The company attributes much of the weakness to weakening overseas currencies vs the dollar. If you take that out of the equation, Discovery says that the profit measure would have increased by 3% and revenues would have been up 5%.

Distribution revenues would have increased 10%, and ad sales would have improved 3%, without the currency effects, the company figures.

Yet expenses increased due to content impairment charges in Northern Europe, as well as growing sports costs. They were up 6% on a reported basis, and 12% if you factor out currency changes.

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