Discovery Communications Inc. (DISCA) reported third-quarter 2013 financial results with both net earnings and revenues falling short of the Zacks Consensus Estimate. Quarterly net income was $255 million or 71 cents per share compared with $205 million or 57 cents per share in the year-ago quarter. However, third-quarter earnings per share of 71 cents were nominally below the Zacks Consensus Estimate of 73 cents.
Quarterly total revenue of $1,375 million was up 27.8% year over year but below the Zacks Consensus Estimate of $1,397 million. Total Distribution revenue was $651 million, up 18.6% year over year. Total Advertising revenue was $665 million, up 42.1% year over year. Other revenues were $59 million, flat year over year.
Quarterly operating expenses were $876 million versus $638 million in the prior-year quarter. However, operating income was $499 million as against $438 million in the prior-year quarter. Quarterly adjusted operating income before depreciation and amortization (OIBDA) was $597 million, up 20% year over year.
During the third quarter of 2013, Discovery repurchased 6 million worth of shares for a total consideration of $448 million, which includes 5.21 million of its Series C common stock and 0.79 million worth of its Series C common stock.
At the end of the first nine months of 2013, Discovery generated $930 million of cash from operations compared with $771 million in the year-ago period. Free cash flow, in the reported quarter, was $854 million as against $718 million in the prior-year quarter.
At the end of the third quarter of 2013, Discovery had $439 million of cash and $6,485 million of debt outstanding compared with $1,201 million of cash and $5,212 million of debt outstanding at the end of fiscal 2012. The debt-to-capitalization ratio, at the end of the reported quarter was 0.51 versus 0.45 at the end of fiscal 2012.
U.S. Networks Segment
Total revenue was $733 million, up 10% year over year. Within this, Distribution revenues were $329 million, up 10% year over year. Advertising revenues were $383 million, up 12% from the prior-year quarter. Other revenues were $21 million, flat year over year. Adjusted OIBDA was $425 million, up 10% year over year. Adjusted OIBDA margin was 58%, flat year over year.
International Networks Segment
Total revenue was $620 million, up 59% year over year. Within this, Distribution revenues were $322 million, up 29% year over year. Advertising revenues were $282 million, up 127% year over year. Other revenues were $16 million, down 6% from the earlier-year quarter. Adjusted OIBDA was $232 million, up 34% year over year. Adjusted OIBDA margin was 37% as against 44% in the prior-year quarter.
Education Segment
Total revenue was $22 million, up 12% year over year. Adjusted OIBDA was $2 million, up 60% from the year-ago quarter. Adjusted OIBDA margin was 9% as against 20% in the prior-year quarter.
Financial Outlook
Discovery expects its total revenue for fiscal 2013 to be between $5.55 billion and $5.625 billion. Adjusted OIBDA is likely to range from $2.42 –$2.475 billion. Net income is anticipated between $1.1 billion and $1.15 billion.
Other Stocks to Consider
Discovery currently has a Zacks Rank #4 (Sell). However, other stocks in the Media industry which warrant a look include AMC Networks Inc. (AMCX), LIN Media LLC (LIN) and Starz (STRZA). All three have a Zacks Rank #2 (Buy).
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