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Discovery Communications (DISCA): Q1 Earnings Preview

We expect Discovery Communications Inc. (DISCA) to beat expectations when it reports first-quarter 2016 results on May 5, before market opens.

In the last quarter, the company posted a negative 17.39% earnings surprise.

Let’s see how things are shaping up for this announcement.

Why a Likely Positive Surprise?

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

Zacks ESP: Earnings ESP for the company stand at +2.22% because the Most Accurate estimate is 46 cents while the Zacks Consensus Estimate is lower at 45 cents. This serves as a meaningful and leading indicator of a likely positive earnings surprise. 

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

The combination of Discovery Communications’ Zacks Rank #3 and +2.22% ESP makes us reasonably confident of an earnings beat.

What is Driving the Better-Than-Expected Earnings?

In order to boost viewership ratings as well as to counter competition, Discovery Communications continues to invest in new content. Moreover, the growing popularity of its TV streaming service Discovery Go among existing pay-TV users will certainly drive top-line growth. In addition, the company is poised to benefit from the improvement in the U.S. economy which will help improve its ad revenues.

However, Discovery Communications’ top line will be affected by foreign currency exchange rate risks as the company has a strong presence outside the U.S.

Other Stocks to Consider

Here are some other companies you may want to consider as our model shows these have the right combination of elements to post an earnings beat this quarter.

ACI Worldwide, Inc. ACIW has an earnings ESP of 12.5% and a Zacks Rank #3.

Time Warner Inc. TWX has an Earnings ESP of +1.55% and a Zacks Rank #3.

Cinemark Holdings, Inc. CNK has an Earnings ESP of +2.13% and a Zacks Rank #2 (Buy).

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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
 
TIME WARNER INC (TWX): Free Stock Analysis Report
 
ACI WORLDWIDE (ACIW): Free Stock Analysis Report
 
CINEMARK HLDGS (CNK): Free Stock Analysis Report
 
DISCOVERY COM-A (DISCA): Free Stock Analysis Report
 
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