Revenues grew by 8% at its global channels business compared to a more modest 1% at its domestic networks. Total revenue grew by 3% over the twelve months to the end of 2018, this growth hit by the sale of its education division in April.
However, when the purchase of Food Network and HGTV owner Scripps Networks was taken into consideration, full year revenues increased 54% to $10.6B.
In the fourth quarter, total revenues came in at $2.8 billion, representing a 51% gain over the year-earlier quarter, but without the Scripps purchase, revenues fell 2% and fell short of Wall Street’s consensus estimate. Growth of 1% in U.S networks and flat revenues at international were offset by the education loss. Earnings of $269M, compared to a $1.1B loss the previous year, exceeded estimates.
Full year net income increased to $594M, compared with a $337M loss in the prior year, due to its M&A activity but was partially offset by higher restructuring and other charges associated with the integration of Scripps Networks and higher tax expenses.
Several analysts offered largely sanguine reactions to the results, but questions about the path forward overshadowed most of the upbeat sentiment about the quarter.
One particularly edgy take came from Sanford Bernstein’s Todd Juenger. “Remember when international was the growth story for Discovery?” he wrote in a note to clients. “Not anymore. International set another low-water-mark for growth we can find on record since 2012 (besting the previous low-water-mark which was set last quarter. That record didn’t last long).” Given what he called “billions of capital poured into international acquisitions and sports rights,” Juenger added, “We continue to question where, how, and when we will see the ROI on those investments.”