Discovery Communications Set For Strong Growth With Scripted TV And International Expansion

Shares of Discovery Communications (NASDAQ:DISCA) trade close to yearly highs. Surprisingly, the media company could be headed higher with new television shows and international ventures.

Discovery %20Twitter&utm_medium=twitter&utm_source=twitter" href=">%20Twitter&utm_medium=twitter&utm_source=twitter" target="_blank">announced its first scripted mini-series will air on the Discovery Channel. "Klondike" will star Academy Award nominated Sam Shepard and hopefully start a new revenue source for the reality television giant. The series, based on the book "Gold Diggers: Striking it Rich in the Klondike" will diversify Discovery away from reality television.

With ownership of Discovery Channel, Animal Planet, TLC, and others, Discovery Communications is a leader in unscripted television. Recent success with the show "Gold Rush" could also serve as a good lead to "Klondike". The new mini-series is themed on six strangers that fight for wealth trying to find gold in the region.

"Gold Rush" has been a huge hit for Discovery. On April, the company announced that it had its best first quarter ratings season with men aged 25-54 and 18 and older. Both of these key demographics saw records thanks to "Gold Rush", "Bering Sea Gold", and "Yukon Men". "Gold Rush" was the number one watched show among men on Friday nights across all television channels, excluding sports.

The success of "Vikings", a scripted television show by rival History Channel could also show what the new "Klondike" show is capable of. History, which predominantly airs documentaries and reality shows, has seen an average of 5 million viewers for its "Vikings" show.

Discovery is diversifying its revenue base away from domestic television. The company, which owns 14 domestic cable channels, has seen its international revenue climb over the last five years. Strong growth is expected in Brazil, Mexico, and Russia. The company will also see significant revenue growth in the Nordic region. Discovery announced a $1.7 billion acquisition of SBS Nordic, which will give the company 14 tv networks in the countries of Denmark, Finland, Norway, and Sweden.

Discovery now has channels in 217 countries around the world. The company's reality shows are aired in 45 languages and continue to be picked up in new territories. International revenue is expected to be 40% of the company's total 2013 revenue.

Analysts on Yahoo Finance expect Discovery to post earnings per share of $3.40. Revenue is expected to come in at $5.58 billion, representing growth of 24.4%. The following year, analysts see earnings per share hitting $4.23 from $6.12 billion in revenue. This marks only 9.6% revenue growth in 2014, which gives Discovery an opportunity to beat analysts with a strong results in international markets and scripted television.

Revenue grew only 8% for Discovery in fiscal 2012, so it does have its work cut out. International television revenue did increase 13% in the fiscal year, compared to 5% growth for domestic television. The company is forecasting even stronger growth in 2013. Discovery gave a range of $5.58 to $5.70 billion for fiscal 2013 revenue.

Shares of Discovery trade above $78 and are near fifty two week highs of $80.34. These two key growth drivers are worth watching and could be reason enough to pay a premium to Discovery's earnings per share. Shares trade at 23.0 times 2013 estimates and 18.4 times 2014 estimates.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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