![]() ![]() All of this will be primarily supported by "at least $4 billion of savings largely addressable through 2024", which is up from the $3 billion initially promised and $3.5 billion updated guidance from last year. The company now expects net leverage to from the current sub-5x to under 4x by the end of the year, which demonstrates solid progress to achieving longer-term aspirations of bringing gross leverage towards the target range of 2.5x to 3x by the end of 2024. WBD reduced its debt exposure by another $1 billion during the fourth quarter, bringing total repayments to $7 billion since completion of the merger in April. But management's bandaid-ripping restructuring efforts over the past 10 months seem to be paying off, nonetheless. ![]() The company reported fourth quarter revenue of $11.0 billion, which underperformed consensus estimates of $11.4 billion, while loss per share came in more than four times higher than the average estimate at -86 cents. WBD's fourth quarter earnings results were largely a disappointment. Is An Impressive Turnaround On The Horizon? We view the upcoming first quarter earnings results, as well as the launch event for WBD's combined streaming product on April 12th, as key focus areas where management will be given the opportunity to demonstrate progress and visibility on the track to achieving the optimistic near-term financial performance guide set-out, and restore credibility to the stock. However, we remain cautiously optimistic, nonetheless, considering the lack of details and visibility in how management aims to achieve the bold near-term financial targets set out during the fourth quarter earnings call, which could lead the latest rally to fizzle first. The following analysis will discuss why we believe this could make a great set-up for WBD from a valuation perspective despite the current market climate where the outlook on the economy and its potential recession remains in question, with borrowing costs still on the rise, which could weigh further on the company's cyclical advertising and consumer-centric media and entertainment business. Both CEO David Zaslav and CFO Gunnar Wiedenfels have set a clear tone at the top to restore investors' confidence in the company's financial outlook following painful bandaid-ripping post-merger restructuring efforts over the past 10 months. Despite disappointing fourth quarter earnings results in late February, the stock has yet to lose its grip on the recent rally, as optimism grows on management's commitment to turning 2023 into the "year of building" at WBD. The stock is up by as much as 77% this year, or +48% YTD at the time of writing (March 15). Discovery ( NASDAQ: WBD) has been a solid gainer this year after more than 10 months of post-merger turmoil for investors. ![]()
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