Discovery channel forecasts growth in U.S. advertising revenue; shares rise

NEW YORK: Discovery Communications Inc, the owner of Animal Planet and the Discovery Channel, said better pricing would help its U.S. advertising revenue improve in 2015, and forecast continuing strong growth in its international networks.

The upbeat forecast helped Discovery's shares reverse initial losses to rise as much as 4.8 percent in early trading on Thursday.

The company forecast full-year revenue and adjusted profit to grow in the "high-single to low-double digits" in percentage terms on a constant currency basis.

Discovery expects U.S. ad sales to accelerate in the first quarter due to "solid" pricing, Chief Financial Officer Andrew Warren said on a post-earnings call.

Ad revenue from Discovery's U.S. networks fell 3.2 percent to $398 million in the fourth quarter from a year earlier, hurt by lower demand for the company's content.

Discovery also reported a better-than-expected adjusted quarterly profit, driven by strong growth in its international networks.

Ad revenue from international networks rose 6.7 percent in the quarter ended Dec. 31, helped by higher delivery in Western Europe and volume growth in Latin America.

"From a fundamental perspective, the trends outside the U.S. are still very strong, and inside the U.S., they're clearly focused on fixing areas of weakness... Clearly today, the stock is looking towards 2015 and beyond," BofA Merrill Lynch analyst Jessica Reif Cohen told Reuters.

However, Discovery's revenue from Russia, which has dragged on the company's otherwise impressive international revenue growth in recent months, looks set to continue its downward spiral due to a new Russian law that bans advertising on cable channels with foreign content.

The "difficult geopolitical situation" in Russia hurt the company's revenue forecast by about $50 million, Warren said.

Falling viewership in the United States has led to Discovery losing advertisers to companies such as Netflix Inc and Amazon.com Inc, which offer video on-demand content.

Discovery partnered with Hulu last December in an attempt to reverse the trend, allowing the television-streaming website to offer shows such as 'MythBusters' and the Emmy Award-winning 'Deadliest Catch'.

Discovery's channels will also be available on PlayStation Vue, a cloud-based TV service by Sony Network Entertainment International LLC, a unit of Sony Corp of America.

Excluding items, Discovery earned 43 cents per share in the quarter, above the average analyst estimate of 41 cents, according to Thomson Reuters I/B/E/S.

The stock was up 2.7 percent at $31.72 in midday trading on the Nasdaq. - Reuters