Tags: Discovery | global | market | DISCA

Discovery Sells Media to a Global Market

By    |   Wednesday, 30 Nov 2011 05:36 PM

Entertainment company Discovery Communications (DISCA) takes its own approach to produce and distribute media products into a global market. Investors should look at the company's business model to determine if current growth can be sustained for the long term.

Discovery Communications owns a portfolio of cable television channels and networks, including the Discovery Channel, TLC and Animal Planet. The company also has 50 percent ownership of the new Oprah Winfrey Network (OWN). In total, the company has 15 U.S. cable networks and more than 20 international networks.

Approximately 60 percent of revenue is generated in the United States. Revenue sources are fairly evenly split between cable provider distribution fees and advertising sales.

For the first nine months of 2011, Discovery Communications generated revenue of $3.11 billion, up 13 percent from $2.76 billion in the first three quarters of 2010. Net income for the period was $1.95 per share, a 93 percent gain from the $1.01 a year earlier.

For the full year 2011, the company is forecast to earn $2.40 per share, compared to $1.78 earned in 2010. The consensus earnings estimate for 2012 is $2.84 per share.

New networks

Discovery currently generates three-quarters of its revenues through what it calls its fully distributed networks. These are the networks that every cable subscriber has included in his or her choices of channels. For example, Discovery Channel is seen in 200 countries.

Emerging networks are new cable channels which do not yet have widespread distribution. The emerging networks, such as Investigation Discovery, SCIENCE and OWN, provide opportunity for future growth along with additional international penetration.

Discovery Communications is aggressively buying up shares as a way to increase future earnings per share. Management so far has spent about half of a $2 billion authorized share buyback.

Recently, UBS analysts confirmed their neutral rating on DISCA but increased the target price for the stock. Analysts at MKM Partners have downgraded the stock to neutral from a buy rating.

The company next reports on Jan. 31.

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Entertainment company Discovery Communications (DISCA) takes its own approach to produce and distribute media products into a global market. Investors should look at the company's business model to determine if current growth can be sustained for the long term. Discovery...
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Wednesday, 30 Nov 2011 05:36 PM
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