Why Did Discovery’s Stock Price Drop on February 18?



Discovery Communications in 4Q15 and 2015

Discovery Communications (DISCA) announced its 4Q15 and 2015 earnings on February 18, 2016, and reported revenues of $6.4 billion for 2015, which was up by 2% on a YoY (year-over-year) basis. Discovery’s revenues for 2015 were in line with consensus Wall Street analyst estimates, and the company saw an adjusted OIBDA (operating income before depreciation and amortization) of $2.4 billion, which represents a YoY fall of 4%.

Discovery reported a diluted EPS (earnings per share) of $1.58 compared to a diluted EPS of $1.66 per share for 2015, which fell short of consensus Wall Street analyst estimates of $1.65 per share in fiscal 2015.

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For 4Q15, Discovery saw revenues of $1.64 million, which represents a decline of 2% over 4Q14 but was in line with consensus Wall Street analyst estimates. The company saw adjusted OIBDA of $574 million for the quarter, which represents a YoY decline of 10%. The company had a diluted EPS of $0.34 per share in 4Q15, which fell short of consensus Wall Street analyst expectations of $0.41 per share.

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Discovery missed Wall Street analyst expectations because foreign exchange rate fluctuations had an adverse impact on the company’s performance. The company’s share price fell by 4% on February 18, the day it announced its earnings.

Negative impact of strong US dollar

Discovery’s international networks made up around 50% of the company’s total revenues in 4Q15 and 2015, and so adverse currency fluctuations negatively impacted Discovery’s revenues in 4Q15 and 2015 by 8% and 2%, respectively.

In 2015, adverse exchange rate fluctuations also affected other media companies like Twenty-First Century Fox (FOXA) and News Corp (NWSA). For FOXA, adverse foreign exchange rate fluctuations impacted revenues by 3%, and News Corp’s revenues were negatively impacted by $141 million from foreign currency exchange rate fluctuations in fiscal 2Q16. IBM’s (IBM) revenue and EPS felt the burn of the rising dollar (UUP) on a YoY basis in 4Q15 as well, dropping by 8.5% and 14%, respectively.

Discovery makes up 0.08% of the PowerShares QQQ Trust Series 1 ETF (QQQ). QQQ also has 4.9% exposure to the television space.

Now let’s look at analyst recommendations for Discovery Communications after 4Q15.


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