Discovery, a top producer of real-life entertainment TV programming, on Thursday beat Wall Street's sales target for the fourth quarter but its earnings evaporated in the period. DISCA stock fell after the report.
The New York City-based company said its sales rose 10% year over year to $3.19 billion in the December quarter. Analysts had expected revenue of $3.12 billion, according to FactSet. But Discovery's earnings dropped 81% to 8 cents a share in the fourth quarter.
Discovery's fourth-quarter sales got a boost from live sports and higher advertising revenue.
It ended the year with 22 million paid streaming subscribers, up 2 million from the end of the third quarter.
DISCA Stock Sinks After Report
"We ended the year with nearly $4 billion of cash on hand and generated robust cash flows, supporting our ability to invest in growth initiatives," Chief Executive David Zaslav said in a news release.
Wells Fargo analyst Steven Cahall called Discovery's fourth-quarter report a "clean print" with "solid free cash flow." He rates DISCA stock as overweight, or buy, with a price target of 46.
On the stock market today, DISCA stock fell 1.7% to close at 27.73.
The earnings report comes two weeks before Discovery shareholders will vote on a merger with the WarnerMedia unit of AT&T. That vote is set for March 11. The transaction is on track to close in the second quarter.
The two companies plan to combine to form Warner Bros. Discovery to better compete in the streaming video market. Discovery runs the Discovery+ streaming service and WarnerMedia runs HBO Max.
DISCA Stock Ranks No. 11 In Industry Group
Investors have hammered streaming video stocks lately amid concerns about slowing growth and elusive profits. The battered stocks include Netflix, Paramount Global and Roku.
DISCA stock ranks No. 11 out of 24 stocks in IBD's Media-Radio/TV industry group, according to IBD Stock Checkup. It has a mediocre IBD Composite Rating of 58 out of 99.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
