Nomura Securities Q2 Review on Discovery Communications (DISCA); Questions on Underlying Growth Sustainability; Prefer DIS, NWS, VIA

Nomura Securities maintains a 'Neutral' on Discovery Communications (NASDAQ: DISCA) price target of $49.00.

Analyst, Michael Nathanson, said, "Discovery reported 2Q12 adjusted EPS of $0.76, $0.06 cents ahead of our and consensus $0.70 estimate. 2Q EBITDA of $543mn (vs. $538mn estimate) was slightly better, which benefitted from better-than-expected cost of revenues and SG&A. U.S. Networks beat our EBITDA estimates by $11mn, while International Networks EBITDA missed us by $8mn or 4%, resulting in total company margins of 48% (130bps better than our est.). Discovery also benefitted from a step down in expenses related to JVs OWN and Hub (-$6mn) and lower tax rate (30% vs. 36% est). The company also repurchased $404mn stock in the quarter, well ahead of our $290mn estimate."

"DISCA trades at 15.1x our last published CY13 EPS. We will revisit estimates following the call. We continue to prefer Disney (NYSE: DIS), News Corp (Nasdaq: NWS) and Viacom (Nasdaq: VIA)."

For an analyst ratings summary and ratings history on Discovery Communications click here. For more ratings news on Discovery Communications click here.

Shares of Discovery Communications closed at $50.93 yesterday.

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