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Watch Out For Broadcasting Stocks' Q1 Earnings: SNI, DISCA

Zacks Equity Research
Updated

The earnings season is moving full steam ahead with multiple reports lined up for release this week. Meanwhile, over 60% of the S&P 500 members have already reported their quarterly numbers.

The releases so far depict an earnings picture which is not too different from that observed in the past few quarters, with both earnings and revenues displaying negative growth so far. In spite of a horde of factors restricting growth, the Q1 earnings season has been a healthy one in terms of earnings beats. The primary reason behind the healthy proportion of companies reporting better-than-expected earnings in Q1 is the conservative nature of the Zacks Consensus Estimate. This is due to the multiple downward revisions in earnings estimates over the past few months reflective of the challenging conditions plaguing the industries.

Given the challenging conditions, it is no surprise that 9 of the 16 Zacks sectors are projected to record negative earnings growth in Q1. Performance of the Energy sector is expected to be the worst, thanks to the extended slump in oil prices. However, there are some sectors which are expected to record positive earnings growth in Q1, despite the widespread headwinds. The widely diversified Consumer Discretionary sector is one of the few sectors expected to end Q1 in positive territory with respect to earnings as well as revenue growth.

In fact, the Consumer Discretionary sector performed encouragingly this far in Q1. As of Apr 29, Q1 results from 54.8% of the sector’s market capitalization in the S&P 500 index were available. Total earnings for these Consumer Discretionary companies are up 7.5% on 3.8% higher revenues year over year, with 80% beating EPS estimates and 55% surpassing revenue expectations.

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Multiple companies in the space including some well-known broadcasting stocks are scheduled to release their Q1 numbers in the current week. Let’s take a look at the earnings forecast for two key broadcasting players, Scripps Networks Interactive SNI and Discovery Communications DISCA, scheduled to report later this week.

Scripps Networks Interactive is scheduled to release first-quarter 2016 results before the commencement of trading on May 5. The Knoxville, TN-based company has an Earnings ESP of -5.94% and a Zacks Rank #3 (Hold). Though a Zacks Rank #3 increases the predictive power of ESP, this alone is not sufficient to secure an earnings beat.

In the fourth quarter of 2015, Scripps Networks had posted a positive earnings surprise of 33.66%. In fact, the company boasts an impressive history with respect to earnings, having outshined the Zacks Consensus Estimate in each of the last four quarters. The average earnings beat is 17.93% (read more: Scripps Networks Q1 Earnings: Stock Set to Disappoint?).

Discovery Communications is scheduled to release first-quarter 2016 financial results before the commencement of trading on May 5. The Silver Spring, Maryland-based company has an Earnings ESP of +2.22% and a Zacks Rank #3. The combination of Discovery Communications’ Zacks Rank #3 and +2.22% ESP makes us reasonably confident of an earnings beat.

In the fourth quarter of 2015, Discovery Communications had posted a negative earnings surprise of 17.39%. However, that happened to be the sole earnings miss for the company in the last four quarters. The average earnings beat for the trailing four quarters is 6.01% (read more: Discovery Communications: Q1 Earnings Preview).

Don’t miss out on our full earnings release articles for these two broadcasting stocks, as the actual results might hold some surprises!

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SCRIPPS NETWRKS (SNI): Free Stock Analysis Report
 
DISCOVERY COM-A (DISCA): Free Stock Analysis Report
 
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