Why Wall Street Isn't Expecting Big Things from Discovery Communications Inc. on May 5

Discovery Communications is set to post first-quarter earnings results before the market opens on Tuesday, May 5. Wall Street has mixed hopes for the TV content giant. Sales are expected to rise 10%, while profit shouldn't budge from the prior year's haul.

The stock is up about 10% since the last quarterly checkup. But shares remain well below the all-time high of $43 they set last September. Here's a look at analysts' expectations.

First-quarter sales and profit targets. 2015 Q1 is Wall Street's projection. Source: Yahoo! Finance and company financial filings.

U.S. vs. internationalThe big story for Discovery lately has been its aggressive global expansion. It made huge investments in overseas programing and distribution, led by the recent Eurosport acquisition. And thanks to moves like that, Discovery for the first time collected more than half of its revenue from outside of the U.S. last year. Management has high hopes for the future of the international business: Advertising sales were up 10% last quarter, and CEO David Zaslav and his team expect more double-digit audience and revenue gains in 2015.

Source: Discovery.

But the U.S. market doesn't have the same strong outlook. Discovery managed some huge ratings wins last year, including three hit shows in the 25 to 54 male demographic. Gold Rush led all cable series in that category, followed closely by Deadliest Catch and Fast N' Loud.

However, overall ratings were down, which dragged advertising sales growth lower as well. After booking a 5% advertising improvement in each of the first two quarters of the year, Discovery posted a 1% gain in the third quarter and a 3% drop to close out the year. Management said in a conference call with analysts that the U.S. performance should stay "tepid" this year -- more like the weak end of 2014 than the big bounce that started the year.

Investing in future growthDiscovery plans to keep investing heavily in content, particularly in programming that reflects its new status as a global TV player. In fact, Zaslav said the company passed last yearon several shows that didn't have worldwide appeal. That was despite the fact that the series would have likely boosted domestic ratings numbers and advertising revenue. "We opted not to do certain programming that we thought would do well in the U.S. but wouldn't play well outside the U.S.," Zaslav told investors back in February.

Heavy spending on content and distribution should hurt profitability this year, especially as Discovery plans to ramp up its investment on sports rights for the Eurosport franchise. Still, that spending fits right into management's goal of expanding Discovery's global footprint beyond the 3 billion total subscribers it had three months ago. That figure was a strong improvement over the 2.5 billion subscribers Discovery had a year earlier.

The article Why Wall Street Isn't Expecting Big Things from Discovery Communications Inc. on May 5 originally appeared on Fool.com.

Demitrios Kalogeropoulos has no position in any stocks mentioned. The Motley Fool recommends Discovery Communications. The Motley Fool owns shares of Discovery Communications.

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