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Why an Earnings Beat is Likely for Scripps (SNI) in Q3?

Scripps Networks Interactive SNI is scheduled to report third-quarter 2017 earnings on Nov 1, after market close.

In the last quarter, the company’s earnings (excluding special items) of $1.79 per share surpassed the Zacks Consensus Estimate of $1.62. Also, the bottom line improved 26.1% on a year-over-year basis on the back of a 3.6% growth in revenues.

Notably, Scripps Networks has surpassed the Zacks Consensus Estimate for earnings in three of the last four quarters, with an average beat of 17.7%.

Lets delve deep to find out the factors likely to have a bearing on Scripps Networks’ third-quarter results.

Below-par advertising revenues are expected to hurt the performance of the company’s flagship division - U.S. Networks. The Zacks Consensus Estimate for third-quarter segmental advertising revenues is pegged at $491 million, much lower than the $553 million reported in the second quarter of 2017.  Total revenues from the U.S. Networks division is pegged at $711 million, much lower than the $779 million in the preceding quarter.

The International Networks segment is also expected to disappoint in the third quarter of 2017. In fact, the pessimism regarding the sector can be made out from the Zacks Consensus Estimate for third-quarter adjusted profits from the unit that is pegged at $5.27 million, much lower than the $38.78 million in the second quarter of 2017.

Increased programming, selling, general and administrative expenses are also likely to hurt the bottom line in the to-be-reported quarter. Evidently, shares of Scripps Networks have declined 3.1% over the last month, as against the Zacks Broadcast Radio And Television industry’s growth of 0.7%.

Despite all the pessimism surrounding the stock, an earnings beat might not be too difficult for Scripps Networks in this quarter owing to reduced expectations. In fact, the Zacks Consensus Estimate for the third quarter seems to be pretty conservative, 40.6% below $1.65 per share reported in second-quarter 2017.

However, we believe that more than the earnings numbers, investors await updates on the impending acquisition of Scripps Networks by Discovery Communications DISCA.

What Does our Model Say?

Our proven model shows that Scripps Networks is likely to beat earnings in the soon-be-reported quarter because it has the right combination of two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — to increase its odds of an earnings surprise.

Zacks ESP: Scripps Networks has an Earnings ESP of +5.10% as the Most Accurate estimate is pegged at 5 cents above the Zacks Consensus Estimate of 98 cents per share. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Scripps Networks carries a Zacks Rank #3, which when combined with a positive ESP, makes us confident of an earnings beat.

Conversely, we caution against stocks with a Zacks Ranks #4 or 5 (Sell rated) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Other Stocks to Consider

Scripps Networks is not the only company in the broader Consumer Discretionary sector that is looking up this earnings season. Here are some companies from the same space, which according to our model also have the right combination of elements to post earnings beat this quarter:

Activision Blizzard ATVI has an Earnings ESP of +5.80% and a Zacks Rank #1 (Strong Buy). The company will report third-quarter 2017 earnings numbers on Nov 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Belmond BEL has an Earnings ESP of +6.25% and a Zacks Rank #3. The company will reveal third-quarter results on Nov 6.

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Scripps Networks Interactive, Inc (SNI): Free Stock Analysis Report
 
Belmond Ltd. (BEL): Free Stock Analysis Report
 
Discovery Communications, Inc. (DISCA): Free Stock Analysis Report
 
Activision Blizzard, Inc (ATVI): Free Stock Analysis Report
 
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