How Will Discovery Communications (DISCA) Stock React To Reports That It's Purchasing The Hub?

NEW YORK (TheStreet) -- Discovery Communications (DISCA)  reportedly wants to purchase a controlling interest in children's entertainment network The Hub from Hasbro (HAS) , according to Bloomberg.

The Hub had 72 million subscribers as of the end of 2013, placing it behind rival Nickelodeon's (VIAB) 99 million subscribers, while competition for family friendly programming from services like Netflix (NFLX) and Amazon Prime (AMZN) has also increased in recent years.

Hasbro will maintain a small stake in the renamed network that will show programming aimed at families and children.

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Discovery Communications broadcasting arm Discovery Channel sold a 50% stake of its Discover Kids network to Hasbro, later becoming The Hub, in 2009 for $300 million.

Discovery Communications shares are down 0.15% to $39.89 in early market trading today.

TheStreet Ratings team rates DISCOVERY COMMUNICATIONS INC as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:

"We rate DISCOVERY COMMUNICATIONS INC (DISCA) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, impressive record of earnings per share growth, compelling growth in net income and notable return on equity. We feel these strengths outweigh the fact that the company shows weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • DISCA's revenue growth has slightly outpaced the industry average of 8.0%. Since the same quarter one year prior, revenues slightly increased by 9.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Powered by its strong earnings growth of 32.92% and other important driving factors, this stock has surged by 96.25% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, DISCA should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • DISCOVERY COMMUNICATIONS INC has improved earnings per share by 32.9% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, DISCOVERY COMMUNICATIONS INC increased its bottom line by earning $2.97 versus $2.52 in the prior year. This year, the market expects an improvement in earnings ($5.46 versus $2.97).
  • The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Media industry average. The net income increased by 26.3% when compared to the same quarter one year prior, rising from $300.00 million to $379.00 million.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Media industry and the overall market, DISCOVERY COMMUNICATIONS INC's return on equity exceeds that of both the industry average and the S&P 500.
  • You can view the full analysis from the report here: DISCA Ratings Report
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