Market Overview

Will Discovery Communications Post Zero Earnings Growth?


Shares of Discovery Communications Inc. (NASDAQ: DISCA) were up about 2 percent on Monday as the company’s earnings date looms. The media and entertainment company will report its first quarter financial results before the market opens on Tuesday.

According to Estimize, analysts and the crowd both expect Discovery Communications to deliver nearly flat year-over-year earnings. In the first quarter of 2014, the company posted earnings of $0.38 per share on revenue of $1.411 billion; for the fist quarter of 2015, analysts expect EPS of $0.36 on revenue of $1.56 billion, while the crowd projects EPS of $0.37 on revenue of $1.552 billion.

The company has managed to beat projections over the past six quarters, suggesting a possible beat in the soon-to-be-reported quarter.

Wall Street’s expectations fell drastically over January and February, hitting a bottom in March, and recuperating in April, when they hit current levels.

Comcast – Time Warner Cable = Bad News

In a report published last week, UBS analysts downgraded Discovery Communications from Neutral to Sell, and trimmed their price target from $33.00 to $30.50.

A recent Benzinga article explained that, since the FCC/DoJ denied Comcast’s acquisition of Time Warner Cable, the former “is likely to now focus on strengthening its fundamentals. This could spell bad news for Discovery Communications.

With Discovery Communications' renewal coming up, the analysts believe that "DISCA would have been in a superior negotiating position had the CMCSA/TWC merger still been under review at June 30th, when the CMCSA renewal is up, but the earlier termination of the deal has exposed renewal risk."

"For now, the analysts believe that there is a 50 percent possibility the renewal is completely uneventful and the concerns are overdone. However, there is also a 50 percent probability of flat-to-down pricing on the Comcast/Discovery renewal."


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