What to expect in Warner Bros. Discovery's Q1 earnings amid Hollywood writers' strike

Yahoo Finance entertainment reporter Allie Canal previews Warner Bros. Discovery's Q1 earnings report and breaks down the potential for the Hollywood writers' strike to impact future earnings.

Video transcript

- Warner Brothers Discovery is set to report its first quarter earnings before the bell on Friday. Let's bring in Yahoo Finance's reporter Alexander Canal, who is looking at a preview. What can investors expect?

ALEXANDRA CANAL: Hi, Akiko. Well, this is going to be an important earnings report ahead of that HBO Max Discovery Plus streaming relaunch. That is Dubbed Max set to debut on May 23. So investors will be keeping a close eye on those direct to consumer losses. Whether or not, we'll see some easing there.

In the fourth quarter, WBD did report a direct to consumer loss of 217 million. Although that was a 511 million improvement over last year. The company estimated its streaming division will break even by next year before hitting profitability in two years.

And on that last earnings call, David Zaslav very adamant that the company is in a good place, that the bulk of its restructuring is behind it, and that they are moving forward as one company. A few other key metrics to look out for. According to Bloomberg consensus data, revenue expected to come in at 10.73 billion. Loss per share of $0.05. And subscriber net additions expected to come in at 911,000.

Now, on top of that competitive streaming market, the company is also struggle with a very unfavorable ad environment. And we saw that happen earlier today with Paramount. They struggled with advertising as well. We saw network revenue tumble 17% in the fourth quarter. 14% excluding foreign exchange. So keep an eye on potential double digit declines on the revenue side as those headwinds and macro concerns continue.

However, I will say on the street, they have been rewarding this company, as you can see on your screen. A heck of a lot more buys than sells. Analysts have really praised Warner Brothers turnaround plan, and their ability to cut costs. Shares are up about 30% year to date. We'll see if the company can keep up that momentum tomorrow morning.

- And Allie, while we're talking about the company's performance in the first quarter, if you talk about what's happening right now, you've got all projects halted essentially because of a writers' strike that's gone into effect since Monday. How big of an impact is that likely to have on Warner Brothers?

ALEXANDRA CANAL: Well, obviously, there's not going to be an impact on this earnings report. But I think moving forward, all of these companies are really taking a look at what's going on in Hollywood, what's happening with this writer's strike, and how that could impact them down the line. David Zaslav, he did specifically address the writers strike during that April HBO Max Discovery Plus streaming event.

He said they have enough content banked in that they should be OK. It's also a company that deals with sports very heavily, and reality, and unscripted content. However, we did hear from Bob Bakish the Paramount CEO earlier this morning, who said that the longer this goes on, the more likely that it will impact their financials, and could potentially diminish revenue. And that's something I think we'll see across the board.

I can guarantee you, David Zaslav is going to be asked about the writers strike on that earnings call tomorrow. But this is a story that's just going to continue. And I think both sides, they want to find a solution as quickly as possible.

However, clearly right now in the negotiations, there's a big gap on the wants and the needs here. So it's something that we're going to continue to track.