Discovery Communications, Inc.
) to beat earnings when the company reports its quarterly numbers
on July 31, 2014, before the opening bell.
Last quarter, the company had delivered a 5.6% positive earnings
surprise. Let's see how Discovery Communications is positioned
prior to the second quarter's announcement.
Why a Likely Positive Surprise?
Our proven model shows that Discovery Communicationsis likely to
beat earnings because it has the perfect combination of two key
Positive Zacks ESP
, which represents the difference between the Most Accurate
estimate and the Zacks Consensus Estimate, stands at +1.1%. This is
very meaningful and a leading indicator of a likely positive
earnings surprise for the company.
Discovery Communicationscurrently has a Zacks Rank #3 (Hold). Note
that stocks with Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a
significantly higher chance of beating earnings estimates.
Conversely, the Sell-rated stocks (Zacks Rank #4 or 5) should never
be considered going into an earnings announcement.
The combination of Discovery Communications' Zacks Rank #3 and
+1.1% ESP makes us reasonably confident of a positive earnings beat
on July 31.
What is Driving the Better-than-Expected
Strong viewership ratings of several Discovery channels are
helping the company to generate healthy advertising revenues. In
the previous quarter, advertising revenues from the International
Networks segment recorded revenue growth of a whopping 108% year
over year. We expect strong international revenues again in the
second quarter driven by strong growth in Brazil, Mexico and Turkey
where penetration rate is below 50%.
In March, the company sealed a deal to supply its programs to
Wasu's new digital subscription channel, Qui Suo. Wasu is a media
and cable television company in China. Discovery Communications'
deal with Wasu seems to be the ideal platform for the former's
business expansion plans in China as the latter has nearly 20
million cable subscribers in China and also dominates the country's
video streaming market. This deal should further drive the
company's international revenues higher in the second quarter and
Other Stocks to Consider
Here are some companies worth considering as our model shows
these have the right combination of elements to post an earnings
beat this quarter:
TIM Participacoes S.A. (
), with earnings ESP of +16.7% and a Zacks Rank #1.
Time Warner Inc. (
), with earnings ESP of +1.2% and a Zacks Rank #3.
ViaSat Inc. (
), with earnings ESP of +375% and a Zacks Rank #3.
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