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Shaw Communications (SJR) Q2 Earnings: A Beat in Store?

We expect Canadian cable TV behemoth Shaw Communications, Inc. SJR to beat expectations when it reports second-quarter fiscal 2016 financial numbers on Apr 14, before the opening bell.

Last quarter, Shaw Communications posted an 8.57% negative earnings surprise. In fact, the company’s earnings have missed the Zacks Consensus Estimate in three of the last four quarters, which leads to an average miss of 3.32%. Let’s see how things are shaping up ahead of this announcement.

Why a Likely Positive Surprise?

Our proven model shows that Shaw Communications is likely to beat earnings because it has the perfect combination of two key ingredients.

Zacks ESP: Earnings ESP for Shaw Communications stands at +3.85% because the Most Accurate estimate is 27 cents while the Zacks Consensus Estimate is pegged at 26 cents. A favorable Zacks ESP serves as a meaningful and leading indicator of a likely positive earnings surprise.  

Zacks Rank: Shaw Communications currently has a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings estimates. Conversely, Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.

The combination of Shaw Communications’ Zacks Rank #3 and +3.85% ESP makes us reasonably confident of an earnings beat.

What is Driving the Better-than-Expected Earnings?

Shaw Communications’ venture into the Canadian wireless market with the acquisition of WIND Mobile should boost the quarter’s results. Notably, the company will now be in a position to offer quad-play services similar to that offered by other large telecom operators in Canada.

Moreover, the deal with Corus Entertainment to sell its wholly owned broadcasting subsidiary – Shaw Media Inc. – places Shaw Communications as a top pure-play telecommunications company with a solid growth profile.

Meanwhile, launch of mobile TV platform, FreeRange TV, should help check customer churn. Additionally, introduction of new services to bring the benefits of managed WiFi and network security to small and medium businesses (SMBs) should boost the company’s results in the to-be-reported quarter.

However, persistent loss of video cable and video satellite customers owing to stiff competition from Canadian telecom and cable multi-service operators is a concern and may tarnish the quarter’s performance.

Other Stocks to Consider

Shaw Communications is not the only company looking up this earnings season. 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:

Rogers Communications Inc. RCI has an earnings ESP of +2.44% and a Zacks Rank #2.

Cablevision Systems Corporation CVC has an earnings ESP of +12.50% and a Zacks Rank #3.

Comcast Corporation CMCSA has an earnings ESP of +1.27% and a Zacks Rank #3.

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
SHAW COMMS-CL B (SJR): Free Stock Analysis Report
 
CABLEVISION SYS (CVC): Free Stock Analysis Report
 
ROGERS COMM CLB (RCI): Free Stock Analysis Report
 
COMCAST CORP A (CMCSA): Free Stock Analysis Report
 
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