Discovery Q3 Profit Rises 10% Despite Flat Performance At U.S. Networks

Discovery Communications said third-quarter profit rose nearly 10% as the company’s international operations buoyed results even as its U.S. cable networks showed evidence of lackluster performance.

The Silver Spring, Maryland, owner of Discovery Channel, TLC and Animal Planet, said net income available to the company in the third quarter came to$280 million, or 41 cents per share, in the third quarter,marking a 9.8% increase from the $255 million, or 35 cents per share, it notched in the year-earlier period.

Revenue in the third quarter came to about $1.57 billion, up 14%, or $193 million, from $1.38 billion in the year-earlier period. A 14% increase in revenue at Discovery’s international operations was offset partially by a 1% decline in revenue at the company’s U.S. networks. Discovery said the U.S. performance was the result of comparisons to year-earlier performance, when the company achieved greater revenue from licensing agreements, but also noted that its U.S. networks suffered from lower ratings during the period.

Discovery had warned in September of sluggish performance at its U.S. networks, noting the company faced difficult comparisons with ratings performance a year earlier.

The results show how much more reliant Discovery is becoming on growth achieved overseas. The company said it had achieved  increased viewership in Western Europe and higher pricing in Latin America and the Nordic regions, in a clear contrast to U.S. performance. Operating income at the company’s international operations rose in the quarter to $202 million from $158 million in the year-earlier period a rise of nearly 28%. But operating income at the company’s U.S. networks fell in the third quarter to $417 million from $440 million, a tumble of 5.2%.

Discovery cut its guidance for revenue performance for the rest of 2014, a maneuver that prompted Wall Street analysts to worry about the company’s ability to improve ratings in the U.S. going forward as more viewers in that country opt to watch TV via new technologies such as video on demand. Discovery said it anticipated reporting revenue of between $6.3 billion and $6.35 billion for the year, compared with previous guidance of between $6.45 billion and  $6.525 billion.

“Improving our ratings is a top priority in the U.S.,” said David Zaslav, chief executive of Discovery Communications, speaking to investors on a conference call Tuesday morning. He said ratings at the company’s flagship Discovery Channel had shown signs of improvement in October, and cited the hire of former Disney executive Rich Ross as president of Discovery Channel as a sign the company was serious about improving current trends.





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