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Media Stocks to Watch for Earnings on Nov 9: NWSA, DISH, DIS

The Q3 earnings season is gradually nearing its end with more than 80% of the S&P 500 companies already having announced their results. Per our Earnings Outlook report as of Nov 3, out of the 406 S&P 500 companies that have come up with their quarterly numbers, approximately 73.9% posted positive earnings surprises, while 66.7% beat top-line expectations.

According to the report, earnings for the 406 S&P 500 companies that have reported are up 7.5% from the same period last year, while revenues have increased 6.3%. Further, the report projects that earnings for the total S&P 500 companies will improve 6.5% from the year-ago period with total revenues rising 5.6%.

Let’s Take a Glance at Consumer Discretionary Sector

However, the widely diversified Consumer Discretionary sector is likely to witness mixed results. Total earnings of the sector are likely to decline 1.2%, while revenues are estimated to increase 2.8% year over year. Media stocks form part of the Consumer Discretionary sector.

Turning our focus to the Media industry, we note that few players have reported their results so far. Among media stocks which have reported their quarterly numbers, CBS Corporation CBS and AMC Networks Inc. AMCX posted mixed results, wherein earnings of both the companies surpassed the Zacks Consensus Estimate but revenues missed the same. Meanwhile, Time Warner Inc. TWX has surpassed both the top and bottom line in the third-quarter 2017.  

Among media stocks lined up to report on Nov 9, let’s take a sneak peek at three companies.

News Corporation NWSA, the diversified media conglomerate, is slated to report first-quarter fiscal 2018 results after the closing bell. The stock has a favorable combination of Zacks Rank #2 (Buy) and an Earnings ESP of +3.70%. Our research shows that for stocks with the combination of a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP, the chance of a positive earnings surprise is as high as 70%. You may uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

News Corporation is in a transitionary phase looking to diversify revenue streams through strategic acquisitions and operational enhancement. The company is expanding its digital offerings, along with greater emphasis on real estate businesses and augmenting digital subscriber base. Further, it has been concentrating on cost cutting.

However advertising, which forms a major part of total revenues, remains highly vulnerable to the economic conditions. Advertising revenue at the News and Information Services segment tumbled 12% during the fourth quarter of fiscal 2017 due to sluggishness in the print advertising market, reduced in-store product revenue at News America Marketing and adverse foreign currency fluctuations. As a result, revenue from the News and Information Services segment declined 10% year over year.

Analysts surveyed by Zacks now anticipate revenue from News and Information Services division to decline 1.6% during the first quarter but envisions growth of 7.8% and 9.7% across Cable Network Programming and Digital Real Estate Services segments, respectively. Book Publishing division is expected to witness revenue growth of 1%.

The current Zacks Consensus Estimate for the quarter under review has increased by a penny in the last 30 days and is currently pegged at 2 cents. This reflects an improvement over a loss of one cent reported in the year-ago quarter. Analysts polled by Zacks anticipate revenues of $1,978 million compared with $1,965 million reported in the prior-year period. (Read more: Factors to Know Ahead of News Corp's Q1 Earnings)

News Corporation Price, Consensus and EPS Surprise

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

DISH Network Corp. DISH, which is slated to report third-quarter 2017 financial results before the opening bell, has created an extensive portfolio of wireless spectrum. The company’s favorable combination of Zacks Rank #2 and an Earnings ESP of +1.68% raise optimism about the positive earnings surprise. You can see the complete list of today’s Zacks #1 Rank stocks here.

We are impressed with the company’s efforts to diversify business model from a pure-play satellite-TV operator to an Internet-TV operator. This should aid the company to counter competitive threats from low-cost video streaming operators. The launch of Air TV Player bodes well for DISH Network’s prospects.

Moreover, DISH Network has been trying to lure customers for its Internet-TV service, Sling TV, by offering services at a reasonable rate along with the addition of other premium networks such as Showtime. Despite such efforts, the company has failed to gain subscribers in the broadband and pay-TV segment.

In second-quarter 2017, DISH Network lost 196,000 pay-TV subscribers compared with a loss of 281,000 in the year-ago quarter. Moreover, the company lost 46,000 broadband subscribers in the reported quarter compared with a loss of 15,000 in the prior-year quarter. This trajectory of subscriber losses in pay TV continues to signify an unprecedented annual decline. DISH Network continues to struggle with the persistent loss of subscribers due to cord cutting. Per the analyst surveyed by Zacks, DISH Network likely to lose 127,000 pay-TV subscribers in third-quarter 2017, compared with a loss of 196,000 subscribers in the preceding quarter. (Read more: Is a Beat in Store for DISH Network in Q3 Earnings?)

DISH Network Corporation Price, Consensus and EPS Surprise

Media giant, The Walt Disney Company DIS, is slated to report fourth-quarter fiscal 2017 results after the closing bell. In the previous quarter, the company had registered a positive earnings surprise of 3.3%. Moreover, it has surpassed the Zacks Consensus Estimate in three of the trailing four quarters with an average earnings beat of 1.8%. Let’s analyze some of the metrics impacting the company’s performance.

Media Networks Likely to Gain

After witnessing a decline of 1% in the preceding quarter, the segment is likely to register a year-over-year increase of 0.8% owing to gain in revenues at Cable Networks. The analyst surveyed by Zacks expects revenues of $5,706 million, up from the prior-year figure of $5,658 million. Meanwhile, Cable Networks and Broadcasting are anticipated to report revenues of $4,009 million and $1,704 million up 1.3% and 0.1%, respectively. However, operating income from the segment is anticipated to decline 4.5% year over year to $1,597 million due to higher programming costs.

Falling subscriber base and higher programming costs at ESPN remain major concerns. Fresh NBA agreement and increase in contractual rate for NFL programming has been driving the overall programming cost higher for ESPN. Disney is striving to bring back ESPN’s golden days. In an effort to attract online viewers, the company has inked a deal with video streaming, data analytics as well as commerce management company BAMTech. Disney which had earlier acquired 33% stake in BAMTech announced its intention to acquire another 42% stake in the firm.

Parks & Resorts Attracting Visitors

Disney’s Parks & Resorts division are also doing well. Disney is focused on deploying its capital toward expansion of the Parks and Resorts business. Consequently, increasing market share and creating long-term growth opportunities. Disney’s Parks and Resorts segment is once again anticipated to deliver growth in final quarter of fiscal 2017. The consensus mark for revenues from the segment is pegged at $4,559 million, up 3.9% year over year. Further, operating income is also anticipated to increase by 4.4% to $730 million.

Another Tough Quarter for Studios Segment

The segment, which impressed investors with blockbuster hits in 2016 has somewhat disappointed in 2017 as the year has been a weaker one for movie industry. The segment revenues declined 16% in the third quarter as the movies released failed to match the prior-year hits of Captain America: Civil War, The Jungle Book, and Finding Dory. The trendy is likely to continue in the fourth as the analyst polled by Zacks expects revenues of $1,637 million, down 9.6% year over year. However, operating income is projected to register a gain of nearly 5% year over year to $400 million. (Read more: Will Disney Live Up to Expectations in Q4 Earnings?)

Disney has an Earnings ESP of +1.37% but carries a Zacks Rank #4 (Sell).

Walt Disney Company (The) Price, Consensus and EPS Surprise

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Time Warner Inc. (TWX): Free Stock Analysis Report
 
CBS Corporation (CBS): Free Stock Analysis Report
 
Walt Disney Company (The) (DIS): Free Stock Analysis Report
 
AMC Networks Inc. (AMCX): Free Stock Analysis Report
 
DISH Network Corporation (DISH): Free Stock Analysis Report
 
News Corporation (NWSA): Free Stock Analysis Report
 
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