Ad Strength Pushes Discovery Earnings Higher


Discovery beat Wall Street expectations and raised its guidance slightly on broad-based advertising gains and international growth.

The cable programmer also announced a $1 billion share buyback plan to help return capital to shareholders.

The company's revenue grew 11 percent from the year-ago quarter to $963 million.

Earnings, excluding one-time items came in at 49 cents per share, up from 42 cents in the year-ago period, and higher than analysts expected. (You can read the company's earnings news release here)

Discovery's strong results speak to the rebound in advertising and the strength in cable, trends we're sure to see continue as media giants report over the course of the week, starting with CBS after the bell today and continuing with Time Warner tomorrow morning. CEO David Zaslav said in the earnings call that he's optimistic that ad revenues will grow strongly over the course of the year, and that the ad network is seeing sequential, quarter-over-quarter improvement.

"Discovery's domestic business is still bigger than its overseas operations, but international properties are gaining." -Media Money, CNBC, Julia Boorstin

The Upfront ad sales period was a successful one: Discovery secured mid to high single digit percentage increases and sold more than 50 percent of its inventory, 30 percent more than last year. Average 9 percent ratings increases across the Discovery networks also pushed numbers higher. The big challenge will come in the fourth quarter, when Discovery faces tough comparisons to last year's Q4, which showed significant gains.

Discovery's international growth story continues to be strong, especially as TLC expands its international footprint. Discovery's domestic business is still bigger than its overseas operations, but international properties are gaining. Revenue from international networks grew 15 percent to $306 million, while domestic revenue grew 10 percent to $620 million. International ad revenue grew a whopping 38 percent in the quarter while domestic ad revenue gained 13 percent.

Now Discovery is focused on launching three new channels. HUB, a kids' channel, co-owned by Hasbro, launches this fall. And Zaslav says the company's making "huge strides" with OWN, the Oprah Winfrey Network, ahead of its 2011 launch. Plus, it's working on a 3-D channel with Sony and Imax . Expectations are high — especially for OWN — and Discovery's working to ensure the channel lives up to the hype.

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