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Will DreamWorks Animation (DWA) Surprise this Earnings?

Zacks Equity Research

DreamWorks Animation SKG Inc. (DWA) is set to release its second-quarter 2014 results after the market closes on Jul 29, 2014.

In the last quarter, the company delivered a 41.67% earnings surprise. Let’s see how things are shaping up for this announcement.

Factors to be Considered this Quarter

DreamWorks is diversifying its Feature film segment to mitigate volatility in the business. The company has also decided to invest in key growth areas in order to expand operations into TV, consumer product, digital content and location-based entertainment.

However, DreamWorks’ revenues are highly dependent on the success of its movie business. Thus, with only one film “The Penguins of Madagascar” left to be released this year, the company’s top line is likely to get affected considerably in the forthcoming quarters.

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Earnings Whispers

Our proven model does not conclusively show that DreamWorks is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, #2 or #3 for this to happen. Unfortunately, this is not the case here as elaborated below. Also, the Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.

Zacks ESP: The Most Accurate estimate is poised at a loss of 7 cents while the Zacks Consensus Estimate is pegged at a breakeven. Hence, the ESP is 0.00%.

Zacks Rank: DreamWorks’ Zacks Rank #3 (Hold) increases the predictive power of ESP.

However, DreamWorks’ Zacks Rank #3 when combined with 0.00% ESP lowers the possibility of an earnings surprise.

Other Stocks to Consider

Here are some other companies to consider as our model shows they have the right combination of elements to post an earnings beat this quarter.

The Walt Disney Company (DIS) has an Earnings ESP of +0.86% and a Zacks Rank #3.

Time Warner Inc. (TWX) has an Earnings ESP of +1.19% and a Zacks Rank #3.

Digital Cinema Destinations Corp. (DCIN) has an Earnings ESP of +66.67% and a Zacks Rank #3.

Read the Full Research Report on TWX
Read the Full Research Report on DIS
Read the Full Research Report on DCIN
Read the Full Research Report on DWA


Zacks Investment Research