The Q3 earnings season is moving full steam ahead with multiple reports lined up for release this week. The quarter has been increasingly heading toward an improvement after five straight quarters of earnings decline. This period is a significant one with both earnings and revenues on the growth trajectory.
Per our Earnings Preview report as of Oct 28, out of the 291 S&P 500 companies that have come up with their quarterly numbers, approximately 73.5% posted positive earnings surprises, while 57.4% beat top-line expectations. According to the report, earnings for the 291 S&P 500 companies that have reported so far are up 2.2% from the same period last year, while revenues have increased 1.3%.
Further, the report projects that earnings for the total S&P 500 companies will improve 2% from the year-ago period with total revenue rising 1.4%. In second-quarter 2016, earnings for the S&P 500 companies declined 2.8%, whereas revenues were flat.
In the thick of the Q3 earnings season, the widely diversified Consumer Discretionary sector has witnessed an encouraging start to the earnings season.
Per the latest report, nearly 40% of the Consumer Discretionary companies have already reported their third-quarter results, out of which 64.3% beat earnings and 50% surpassed revenue estimates. Total earnings for these companies surged 8.2% while revenues increased 8.4% year over year. Media stocks form part of the Consumer Discretionary sector.
Among Media stocks lined up to report on Nov 2, let’s take a sneak peek at four companies.
Time Warner Inc. TWX, the media and entertainment company, is slated to report third-quarter 2016 results before the market opens. The question lingering in investors’ minds now is, whether the company will be able to continue with its positive earnings surprise streak in the quarter to be reported. In the trailing four quarters, it outperformed the Zacks Consensus Estimate by an average of 11.6%. The Zacks Consensus Estimate for the third quarter is pegged at $1.35.
We believe Time Warner’s foray into new markets and digital endeavors augur well for its operational performance. We also think that management’s focus on original programming, cost reduction and increasing investments in key areas will enhance profitability. Additionally, the company has been expanding its digital presence to enable consumers to access content from several platforms and devices. Its investments in video content and technology continue to drive results. All these initiatives are likely to be reflected in the quarter to be reported.
However, decline in overall advertising spending and currency headwinds may adversely impact the company’s performance. Moreover, management had earlier highlighted that it anticipates facing tough comparisons in video games and TV licensing at Warner Bros. during the third quarter. (Read more: Will Time Warner's Stock Gain Post Q3 Earnings?).
Time Warner carries a Zacks Rank #3 (Hold) and has an Earnings ESP of 0.74%. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.
Twenty-First Century Fox, Inc. FOXA is scheduled to report first-quarter fiscal 2017 results. In the previous quarter, the company’s earnings surpassed the Zacks Consensus Estimate by a margin of 25%. Notably, in the trailing four quarters, the company surpassed the Zacks Consensus Estimate by an average of 6.9%.
In fourth-quarter fiscal 2016, the company’s expenses rose 15% primarily due to hiked sports programming costs owing to soccer rights costs at FNG International as well as Major League Baseball and streaming rights costs at the RSNs. Further, it anticipates costs at Cable Network to go up in fiscal 2017. Increase in expenses may dent the company’s margins and consequently the bottom line in the first quarter and the succeeding quarters. (Read more: Twenty-First Century Fox Q1 Earnings: What's Up?)
Twenty-First Century Fox has an Earnings ESP of 0.00%. The Zacks Consensus Estimate for the quarter is pegged at 44 cents. The company carries Zacks Rank #3. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
TEGNA Inc. TGNA, based in McLean, VA, maintains a portfolio of media and digital businesses. The company outpaced the Zacks Consensus estimate by 2% in the previous quarter. Notably, in the trailing four quarters, the company’s earnings have surpassed the estimate, with an average earnings surprise of 7.5%. However, things appear bleak for the company in Q3. Even though TEGNA has a Zacks Rank #3, its Earnings ESP of 0.00% makes an earnings beat unlikely. The Zacks Consensus estimate is currently pegged at 58 cents.
Sinclair Broadcast Group, Inc. SBGI which operates as a television broadcasting company is slated to report third-quarter 2016 results. In the previous quarter, the company’s earnings missed the estimate by 3.7%. The company has a Zacks Rank #3 and an Earnings ESP of -2.70%. This is because the Most Accurate estimate currently stands at 72 cents while the Zacks Consensus Estimate is pegged higher at 74 cents.
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