Warner Bros. Discovery WBD stock rose nearly 12% after the company reported strong streaming results in the third quarter of 2024, including its largest-ever quarterly subscriber growth since the launch of Max. However, revenues missed expectations as the media giant struggled with a drop in its studios segment and continued declines from its linear TV business.
Revenues came in at $9.62 billion, missing the Zacks Consensus Estimate by 3.4% and declining 3.6% year over year. The company reported adjusted earnings per share of 5 cents in contrast to the Zacks Consensus Estimate of a loss of 7 cents. The company had incurred a loss of 17 cents in the year-ago quarter.
WBD ended the third quarter of 2024 with 110.5 million global DTC subscribers, which increased 7.2 million sequentially, the company's largest quarterly subscriber growth yet. The total subscriber figure beat the Zacks Consensus Estimate by 2.02%. The figure missed the Zacks Consensus Estimate by 5%.
Global DTC ARPU increased 1% ex-FX to $7.84, primarily driven by the growth of the ad tier domestically, higher pricing, along with the continued subscriber mix shift from linear wholesale to other distribution channels, partially offset by a rise in lower ARPU international markets. The figure missed the Zacks Consensus Estimate by 3.21%.
This subscriber strength comes amid the recent launch of Max in markets outside of the United States, including Latin America and Europe, along with increased bundling with competitors. Later this month, Max will be launched in seven markets across Southeast Asia, and next year, Max will be introduced in Australia and over a dozen other markets, including three of the biggest markets in Europe in 2026.
Key programming like the second season of House of the Dragon, along with the Olympics, also helped boost the metric.
Outside of strong subscribers, the company saw a 49% year-over-year (up 51% ex-FX) jump to $205 million in streaming advertising revenues, driven by an increase in domestic ad-lite subscribers. The figure missed the Zacks Consensus Estimate by 5%.
Overall DTC revenues (27.4% of revenues) increased 8% from the year-ago quarter to $2.63 billion. The figure missed the Zacks Consensus Estimate by 3.18%. The division posted profits of $289 million in the quarter compared with the $111 million it reported in third-quarter 2023. Recent price hikes have helped aid profits. The company boosted the price of its ad-free plans on Max in June.
The company also has its upcoming sports streaming partnership with Disney DIS and Fox FOXA, although a judge temporarily blocked the launch, citing antitrust concerns.
A significant development in the third quarter is the strategic partnership with Charter Communications CHTR, integrating Max (Ad Lite) and Discovery+ content into Spectrum TV Select packages. Steady viewership growth across the company's channel portfolio, including major networks like Discovery Channel, Food Network and HGTV, was positive.
Warner Bros. Discovery, Inc. Price, Consensus and EPS Surprise
Warner Bros. Discovery, Inc. price-consensus-eps-surprise-chart | Warner Bros. Discovery, Inc. Quote
The Studios Segment Remains Dull in Q3
Studios revenues decreased 17% ex-FX to $2,680 million compared to the prior-year quarter. The figure missed the Zacks Consensus Estimate by 8.38%.
The company’s TV Studio is on track to have its most profitable year in scripted content in the last five years. It currently makes more than 80 live action scripted, unscripted and animated series for nearly 20 platforms, including all the major U.S. broadcast networks and teen U.S. SVOD platforms.
Theatrical revenues decreased 40% ex-FX, primarily due to lower box office revenues as the performance of Beetlejuice Beetlejuice and Twisters in the current year was more than offset by the stronger performance of Barbie in the prior year.
Games revenues declined 31% ex-FX, primarily attributable to the better performance of the prior-year slate, mainly Mortal Kombat 1, compared to the current-year slate.
This Zacks Rank #4 (Sell) company anticipates improved profit results for the Studios segment in the fourth quarter of 2024.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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