🔺 What to do when markets are at an all-time high? Find smart bargains, like these.See Undervalued Shares

Discovery cuts forecast on strong dollar, problems in Russia

Published 04/11/2014, 17:27
Updated 04/11/2014, 17:30
© Reuters To match Special Report USA-HEALTHCARE/WELLNESS

By Abhirup Roy

(Reuters) - Discovery Communications Inc, owner of cable channels such as Animal Planet and Discovery Channel, cut its full-year revenue and profit forecasts, citing a strong dollar, weaker U.S. ratings and tensions between Russia and the West.

The company's shares fell as much as 10.2 percent in early trading on Tuesday.

Discovery gets more than half its revenue from its international networks, with about 2 percent of the total coming from Russia.

Economic growth in Russia has stalled, hit by large capital outflows and sanctions imposed by the United States and European Union in response to Kremlin's policy on Ukraine.

Adding to the company's problems in the country, a law banning advertising on cable TV will come into effect on Jan. 1.

The government says the law is aimed at reducing competition between pay TV and free-to-air channels.

Revenue from Discovery's international operations jumped 32 percent in the third quarter ended Sept. 30, while revenue from the United States fell 1 percent.

The company said its ad revenue in the United States was hurt by a fall in summer cable viewership and lower-than-expected ratings.

"I think it is too early to call it a trend," Chief Executive David Zaslav said in a post earnings conference call.

"There are a lot of markets where we have seen viewership come down and then come back up."

Discovery makes money from advertising and fees paid by cable networks such as Comcast Corp and DirecTV to carry their channels.

"I think the impact (of Russia) on fourth-quarter guidance was greater than expected because ... you are starting to see a tapering of advertising ahead of the Jan. 1 change in policy," Nomura Securities analyst Anthony DiClemente told Reuters.

Diclemente said the dollar's recent sharp rise against most currencies, including the rouble, in recent weeks was also largely unexpected.

The dollar rose about 7 percent against a basket of major trading currencies in the third quarter, compared with the third quarter of 2013.

Discovery forecast a full-year adjusted profit of $1.28 billion (799.90 million British pound)

- $1.31 billion, on revenue of $6.3 billion-$6.35 billion.

It had earlier forecast a full-year adjusted profit of $1.34 billion-$1.4 billion on revenue of $6.45 billion-$6.53 billion.

Analysts on average expect revenue of $6.43 billion, according to Thomson Reuters I/B/E/S.

Net income available to the company rose to $280 million, or 41 cents per share, in the quarter from $255 million, or 35 cents per share, a year earlier.

Excluding items, the company earned 46 cents per share.

Total revenue rose 14 percent to $1.57 billion.

Analysts on average had expected a third-quarter profit of 42 cents per share on revenue of $1.59 billion.

© Reuters. To match Special Report USA-HEALTHCARE/WELLNESS

Discovery shares were down 8.4 percent at $32.68 in late morning trading on the Nasdaq. Up to Monday's close, the stock has dropped about 23 percent this year.

(Reporting by Abhirup Roy in Bangalore; Editing by Ted Kerr)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.