Media Stocks' Earnings Roster for Feb 8: VIAB, NWSA & More

The fourth-quarter 2017 earnings season is shaping up as one of the best quarters in recent times. In fact, the season has so far been spectacular, displaying all-round strength and momentum. Apart from an above-average proportion of positive surprises, we are witnessing solid upward revisions in estimate  for the current quarter.

Per the Earnings Preview dated Feb 2, about 251 S&P 500 index members have reported results. Of these, about 80.5% delivered a positive earnings surprise and about 78.1% beat revenue estimates. The blended beat ratio (companies beating both earnings and revenues) so far has been 64.9%. Further, total earnings for these companies were up 16%, on 10.5% revenue growth.

Undoubtedly, the fourth-quarter earnings season is on track to be among the best in recent quarters. The results are better not only in terms of enhanced growth from the same group of 251 index members but also a greater proportion beating top- and bottom-line estimates.

Coming to expectations, total fourth-quarter earnings for the S&P 500 are expected to increase 13% year over year, with a 7.7% rise in revenues. This follows 6.7% earnings growth and 5.9% revenue increase recorded in the third quarter.

A Look at Consumer Discretionary Sector

The performance of the index is determined by all 16 Zacks sectors, out of which 14 are estimated to witness year-over-year earnings growth. The Consumer Discretionary sector, which houses major media stocks, seems to be one among the sectors to lag this quarter. Per the report, the Consumer Discretionary sector is likely to witness earnings decline of 3.7% while revenues are expected to increase 3.7% this earnings season.

Currently, the Consumer Discretionary sector is ranked among the bottom 31% (11 of 16) of all the Zacks sectors. Nonetheless, the sector has rallied 8.4% in the last three months, outperforming the S&P 500 market’s gain 2.2%. So, let’s see what awaits the following Media stocks that are queued up for earnings releases on Feb 8.

Our research shows that stocks with the combination of a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP have higher chances of delivering positive earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Let’s See How VIAB, NWSA, WWE & LGF.A Are Placed

Leading entertainment content company operating primarily in the United States and Europe, Viacom Inc. VIAB, is set to report first-quarter fiscal 2018 (ended Dec 31, 2017). Although the company carries a Zacks Rank #3 (Hold), our earnings beat criteria was let down by its Earnings ESP of -1.64%.

Viacom Inc. Price, Consensus and EPS Surprise

Viacom Inc. Price, Consensus and EPS Surprise | Viacom Inc. Quote

Viacom’s first-quarter fiscal 2018 results are likely to be hurt by weak affiliate revenues in the United States due to loss of subscribers. The Zacks Consensus Estimate for affiliate revenues is pegged at $1,076 million, below $1,150 million in the previous quarter. Additionally, advertising revenues are expected to remain weak in the fiscal first quarter. Soft advertising and affiliate revenues are expected to hurt the company’s primary division — Media Networks too. Below-par performance of the company’s principal revenue generating division will naturally hurt its overall results. Moreover, higher programming expenses have the potential to hurt results in the to-be-reported quarter.

However, the company’s performance on the international front is anticipated to be much better. Additionally, strong growth in international consumer products is likely to boost ancillary revenues. Similarly, internal growth should boost total advertising revenues, mitigating the weakness on the domestic front. (Read more: Will Subscriber Woes Mar Viacom's Earnings in Q1?

Moving to News Corporation NWSA, this diversified media and information services conglomerate carries a Zacks Rank #4 (Sell). Moreover, the company’s current Earnings ESP is -8.11% makes surprise prediction impossible. Nevertheless, its efforts to diversify revenue streams through strategic acquisitions and operational enhancement alongside stringent cost cutting are impressive. The company is also expanding its digital offerings, emphasizing on real estate businesses and augmenting digital subscriber base.

News Corporation Price, Consensus and EPS Surprise

News Corporation Price, Consensus and EPS Surprise | News Corporation Quote

However, advertising, which forms a major part of total revenues, continues to be highly vulnerable to economic conditions. In fact, advertising revenues in the News and Information Services segment remained flat in the preceding quarter. This is because contributions from the buyouts of Australian Regional Media and Wireless Group, favorable foreign currency fluctuations and modest rise in digital advertising revenues were offset by sluggishness in the print advertising market and lower free standing insert revenues at News America Marketing. Previously, management had highlighted that FOX SPORTS Australia is likely to struggle against higher costs during the second quarter due to the amortization of NRL rights throughout the year. (Read more: Factors Likely to Decide News Corp's Fate in Q2 Earnings)

Taking a sneak-peek at World Wrestling Entertainment Inc. WWE, we note that this integrated media and entertainment company is likely to beat expectations in the to-be reported quarter. The company fulfills the Zacks earnings beat criteria as it has an Earnings ESP of +2.56% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

World Wrestling Entertainment, Inc. Price, Consensus and EPS Surprise

World Wrestling Entertainment, Inc. Price, Consensus and EPS Surprise | World Wrestling Entertainment, Inc. Quote

WWE has garnered a stellar revenues record with sturdy growth delivered in the last three quarters. We believe this record is likely to continue as it has not only extended its earlier deal but also signed agreements with the new service provider for airing its flagship program — Raw and SmackDown — in different countries. Further, subscriber growth and worldwide increase in TV rights fees are anticipated to provide an impetus to the top line. Furthermore, revenues from international sponsorship will receive an additional stimulus from WWE’s agreement with sports marketing agency — Lagardère Sports. We believe with increasing subscription-based video streaming services, WWE Network through its vast presence in more than 180 countries will be able to capitalize on the trend. (Read more: Subscriber Growth, TV Right Fees to Drive WWE Q4 Earnings)

Finally, let’s assess the earnings beat criteria for Lions Gate Entertainment Corporation LGF.A, a producer and distributor of motion pictures for theatrical and straight-to-video release. The surprise prediction for this stock is also difficult given its Zacks Rank #3 and an Earnings ESP of -4.19%.

Lions Gate Entertainment Corporation Price, Consensus and EPS Surprise

Lions Gate Entertainment Corporation Price, Consensus and EPS Surprise | Lions Gate Entertainment Corporation Quote

Lions Gate’s strategic acquisitions and alliances to enhance its competitive position and maximize returns along with building a diversified portfolio bode well for the company. Notably, the addition of Starz is aiding Lions Gate to emerge as a major player in the TV space and helping it regain lost ground in the streaming network. Moreover, the company has invested in The Immortals to capitalize on the increasing popularity of eSports. It expects the eSports market to grow more than$1 billion in fiscal 2018.

However, fewer movie releases in fiscal 2018 compared with the previous year might hurt Motion Pictures revenue performance. Dismal television production performance in the past few quarters has also been a concern for investors. Further, the escalating cost of motion picture production and marketing in recent years may jeopardize Lions Gate’s margins. (Read more: What's in the Cards for Lions Gate in Q3 Earnings?)

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Viacom Inc. (VIAB) : Free Stock Analysis Report
 
World Wrestling Entertainment, Inc. (WWE) : Free Stock Analysis Report
 
Lions Gate Entertainment Corporation (LGF.A) : Free Stock Analysis Report
 
News Corporation (NWSA) : Free Stock Analysis Report
 
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