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Discovery Swings to Profit in Fourth Quarter

Discovery Communications CEO David Zaslav is
Richard Drew/AP/REX/Shutterstock

Discovery Inc. said it swung to a profit in the fourth quarter after posting a loss in the year-earlier period, but that didn’t impress investors, who sent the stock down in early trading Tuesday morning after the company missed analyst estimates for earning and revenue.

The owner of the Discovery, TLC and OWN cable networks, which purchased Scripps Networks Interactive last year, said fourth-quarter revenue rose 51% to a nearly $2.81 billion from the year-earlier period. On a pro-forma basis, however, revenue was off 1%, as a 2% increase in revenue at its U.S. networks and flat results at its overseas operations were offset by a decrease in revenue from its education business, in which Discovery sold a majority stake last year. Wall Street had expected revenue of $2.83 billion.

Profit in the fourth quarter came to $269 million, or 38 cents a share, compared with a loss of $1.1 billion in the year-earlier period, when the company reported an impairment charge.

Shares of Discovery were recently down nearly 7.5%, or $2.18, to $27.03. The stock’s 53-week low is $20.60 a share.

In a statement, Discovery CEO David Zaslav said executives remained “optimistic that we will continue to build on all of our operating momentum to drive additional shareholder value into the future.”

The company said US. advertising revenue rose 3% on a pro forma basis, with ad revenue from digital content and an increase in ad prices offsetting lower ratings at the company’s cable networks. Executives said ratings at the company’s flagship Discovery Channel had fallen during the quarter, but noted trends seemed to be improving.

Zaslav sketched out plans for the company’s content alliance with Chip and Joanna Gaines, the fix-it experts who have led the popular HGTV progam “Fixer Upper.” During a conference call with analysts Tuesday morning, the Discovery CEO indicated the pair would lead not only a linear cable network but also a direct-to-consumer offering as part of a recent content agreement they struck with the company. “We now have an opportunity with Chip and Joanna to take a network that is doing OK and take it to the next level,” the executive said, without specifying which of the company’s networks might be ripe for a Gaines makeover.