Discovery Communications Inc. (DISCA,DISCB,DISCK) on Tuesday reported a 5 percent increase in profit for the first quarter from last year, reflecting strong revenue growth at its international networks segment. However, earnings per share missed analysts' expectations. Looking ahead, the company affirmed its financial outlook for fiscal 2013.
Revenues for the latest quarter at U.S. Networks edged up 1 percent from the year-ago period to $686 million.
Advertising revenue at the segment rose 8 percent mainly on higher delivery and increased pricing. However, distribution revenue declined 9 percent as higher rates and subscriber growth primarily from networks carried on the digital tier were more than offset by additional revenues from licensing agreements in the year-ago period.
International Networks revenue grew 17 percent to $444 million, reflecting 23 percent growth in advertising revenue and 15 percent increase in distribution revenue. Education revenues rose 13 percent to $27 million, mainly reflecting increased streaming volumes as well as higher digital textbook sales.
David Zaslav, President and CEO of Discovery Communications said, "The significant operating momentum Discovery generated throughout 2012 continued unabated in the first quarter with more and more audiences around the globe viewing our unique programming. The sustained investment we have made in developing compelling content, along with the quality of our brands, translated into further market share gains, with record first quarter viewership at our domestic networks and 16% audience growth across our international portfolio."
Discovery, whose television networks include Discovery Channel, TLC and Animal Planet, reported first-quarter net income of $231 million or $0.63 per share, up from $221 million or $0.57 per share in the year-ago period. On average, 25 analysts polled by Thomson Reuters expected the company to report earnings of $0.65 per share for the quarter. Analysts' estimates typically exclude special items.
The latest quarter's results include a $92 million gain associated with the consolidation of Discovery Japan and $46 million of improved equity earnings. These were partly offset by higher taxes, increased mark-to-market equity-based compensation and $59 million of losses from hedging activities primarily associated with the acquisition of the SBS Nordic operations.
Total revenue for the quarter grew 7 percent to $1.16 billion from $1.09 billion in the same period last year. Analysts had a consensus revenue estimate for the quarter of $1.15 billion.
Looking ahead to fiscal 2013, Discovery affirmed its outlook for net income of $1.20 billion to $1.30 billion and total revenue in a range of $5.575 billion to $5.700 billion. Analysts expect the company to report earnings of $3.38 per share for the year on revenue of $5.55 billion.
The company said that the outlook incorporates the later closing of the SBS transaction, current foreign exchange rates for revenues and expenses, and the current share price for mark-to-market equity-based compensation calculations.
In early April, Discovery said it completed the acquisition of the SBS Nordic operations of ProSiebenSat.1 Group. The acquisition adds 12 television networks, as well as leading radio stations and several digital brands, to Discovery's existing portfolio of eight brands, to form a combined regional business to be known as SBS Discovery Media.
DISCA closed Monday's trading at $79.02. In Tuesday's pre-market, the stock is down $1.67 or 2.11 percent to $77.33.
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