Warner Bros. Discovery’s stock tumbles as streaming losses improve but miss Wall Street’s mark

Warner Bros. Discovery’s stock tumbles as streaming losses improve but miss Wall Street’s mark

Warner Bros. Discovery easily beats expectations on free cash flow

Warner Bros. Discovery Inc.’s stock was tumbling nearly 9% premarket Friday after the company posted a wider-than-expected fourth-quarter loss and revenue that fell short of estimates, weighed down by weak ad revenue and the impact of the recent writers and actors strikes.

The company’s WBD, -9.94% direct-to-consumer business saw losses narrow on the basis of adjusted earnings before interest, taxes, depreciation and amortization but still fell short of Wall Street expectations on that metric.

In streaming, or direct-to-consumer, Warner operates the Max service, among others. Warner’s DTC business recorded a fourth-quarter adjusted Ebitda loss of $55 million, making for a $162 million improvement relative to a year before. Analysts tracked by FactSet had been looking for $20 million in positive adjusted Ebitda.

Total streaming subscribers came in at 97.7 million.

The company had an overall net loss of $400 million for the quarter, or 16 cents a share, narrower than the loss of $2.101 billion, or 86 cents a share, posted in the year-earlier period.

Revenue fell to $10.8 billion from $11 billion. The FactSet consensus was for a loss of 10 cents a share and revenue of $10.3 billion.

Studio revenue fell 18% excluding the impact of foreign exchange, while network revenue was down 8%. Ad revenue fell 14%, mostly due to shrinking audiences in domestic general entertainment and news networks, as well as the impact from the exit of the AT&T SportsNet business.

Warner easily topped expectations on free cash flow, which came in at $3.3 billion, while analysts had been looking for $2.5 billion. “Free cash flow benefited from lower cash content spend due to the strikes,” Evercore analyst Vijay Jayant wrote in a note to clients.

The stock has fallen 39% in the last 12 months, while the S&P 500 SPX has gained 26.8%.

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