Discovery Communications Inc. (DISCA) reported mixed financial results for the fourth quarter of 2013. While net earnings significantly outpaced the Zacks Consensus Estimate, total revenue fell below the same. The board of directors has approved a $1.5 billion increase to the existing stock repurchase program, lifting the total authorization to $5.5 billion.
Quarterly net income was $289 million or 81 cents per share compared with $224 million or 61 cents per share in the year-ago quarter. However, fourth-quarter adjusted earnings per share of 92 cents were well above the Zacks Consensus Estimate of 88 cents.
Quarterly total revenue of $1,537 million was up 28.1% year over year but below the Zacks Consensus Estimate of $1,548 million. Total Distribution revenue was $640 million, up 18.3% year over year. Total Advertising revenue came in at $817 million, up 40.4% year over year. Other revenues were $80 million, up 3.9% year over year.
Quarterly operating expenses were $1,016 million against $719 million in the prior-year quarter. However, operating income was $521 million compared with $481 million in the prior-year quarter.
Quarterly adjusted operating income before depreciation and amortization (OIBDA) was $662 million, up 21.5% year over year. During the fourth quarter of 2013, Discovery repurchased 4.3 million worth of shares for a total consideration of $336 million.
During 2013, Discovery generated $1,285 million of cash from operations compared with $1,099 million in 2012. Free cash flow, in 2013, was $1,170 million compared with $1,022 million in 2012.
At the end of 2013, Discovery had $408 million of cash and $6,499 million of debt outstanding against $1,201 million of cash and $5,212 million of debt outstanding at the end of 2012. The debt-to-capitalization ratio, at the end of 2013 was 0.51 against 0.45 at the end of 2012.
U.S. Networks Segment
Total revenue stood at $740 million, up 5% year over year. Within this, Distribution revenues were $309 million, up 7% year over year. Advertising revenues were $411 million, up 4% from the prior-year quarter. Other revenues were $20 million, up 11% year over year. Adjusted OIBDA was $434 million, up 5% year over year. Adjusted OIBDA margin was 59%, flat year over year.
International Networks Segment
Total revenue was $758 million, up 64% year over year. Within this, Distribution revenues were $331 million, up 31% year over year. Advertising revenues stood at $406 million, up a substantial 119% year over year. Other revenues were $21 million, down 13% from the earlier-year quarter. Adjusted OIBDA was $295 million, up 47% year over year. Adjusted OIBDA margin was 39% as against 44% in the prior-year quarter.
Education Segment
Total revenue was $41 million, up 17% year over year. Adjusted OIBDA was $14 million, up 8% from the year-ago quarter. Adjusted OIBDA margin was 34% as against 37% in the prior-year quarter.
Financial Outlook
Discovery expects its total revenue for fiscal 2014 to be between $6.45 billion and $6.625 billion. Adjusted OIBDA is likely to range from $2.6–$2.725 billion. Net income is anticipated between $1.2 billion and $1.3 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 Cumulus Media Inc. (CMLS), LIN Media LLC. (LIN) and Starz (STRZA). All three have a Zacks Rank #2 (Buy).
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