NEW YORK (TheStreet) -- Shares of Discovery Communications (DISCA) are down 1.06% to $33.69 after Jefferies lowered its core fourth quarter U.S. advertising estimate by 100bps from 1% to flat and its fourth quarter U.S. revenue and OIBDA estimates to $762 million and $401 million from $766 million and $404 million, respectively.
The threats to traditional TV were underscored in a new report from Cowen media analyst Doug Creutz, who estimates that national television advertising has been roughly flat on a year-over-year basis for the last two quarters.
Additionally, "we think the shift into sports advertising spots is disproportionately impacting networks without sports and likely ratings as well," Jefferies analysts said about the global nonfiction media and entertainment company.
"Our 4Q revenue, OIBDA and EPS [for DISCA] is now $1.73 billion, $660 million and 45 cents (FC: $1.74 billion, $666 million, 45 cents) vs. prior 46 cents. We are also adjusting our longer term outlook for U.S. cable network advertising to 3% from our prior 4% estimate, as well as assuming a greater F/X headwind in 2015," analysts added.
Separately, TheStreet Ratings team rates DISCOVERY COMMUNICATIONS INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:
"We rate DISCOVERY COMMUNICATIONS INC (DISCA) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, reasonable valuation levels, impressive record of earnings per share growth and expanding profit margins. 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 9.0%. Since the same quarter one year prior, revenues rose by 14.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- 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.
- DISCOVERY COMMUNICATIONS INC has improved earnings per share by 17.1% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, DISCOVERY COMMUNICATIONS INC reported lower earnings of $2.05 versus $2.52 in the prior year. This year, the market expects an improvement in earnings ($5.13 versus $2.05).
- The gross profit margin for DISCOVERY COMMUNICATIONS INC is currently very high, coming in at 89.99%. Regardless of DISCA's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, DISCA's net profit margin of 17.85% compares favorably to the industry average.
- You can view the full analysis from the report here: DISCA Ratings Report