2 Media Stocks Poised to Beat Estimates This Earnings Season

This earnings season, media companies' results are expected to mirror consumers' growing appetite for over-the-top content consumption. The rise of streaming platforms has led audiences to abandon traditional cable and satellite TV subscriptions in favor of on-demand viewing.

The industry faces significant headwinds from declining broadcast television ratings and reduced demand for theatrical content sales. Advertisers' reluctant spending amid inflation and higher interest rate concerns have compounded these challenges. The accelerating cord-cutting trend and stiff competition from subscription video-on-demand and virtual Multichannel Video Programming Distributor services have disrupted traditional business models.

However, media giants have been benefiting from the surging demand for high-speed broadband. Strong sales of WiFi devices and wireless Internet services have provided a boost.

Industry players leveraging diversified content offerings tailored for digital platforms are better positioned. Original programming, regional content, short-form videos suited for mobile devices, improved Internet speeds and penetration rates, and technological innovation favor adaptable media companies. As ad revenues remain muted, profit protection through cost management and tech integration has taken on strategic importance.

Media conglomerates like Disney DIS and Paramount Global PARA are expected to report soon and are anticipated to come up with resilient top-line results driven by these dynamics.

Capitalizing on Media's Digital Pivot: A Lucrative Prospect

Investing in media companies spearheading digital transformation through original content production and capitalizing on surging high-speed Internet demand presents an attractive opportunity. The convergence of these trends allows forward-thinking media firms to unlock new revenue streams, expand globally and successfully navigate the rapidly evolving media landscape.

The industry pivot to digital is fueling a boom in exclusive, high-quality original programming to meet discerning audience tastes. Media giants like Warner Bros. Discovery WBD are investing heavily in marquee content, both reacting to shifting consumption patterns and proactively differentiating themselves in an overcrowded digital space. Successful original shows drive subscriber stickiness and open additional revenue opportunities through lucrative licensing and syndication deals.

Media companies are also experiencing a paradigm shift in monetization away from traditional TV toward diverse digital ad revenue sources across websites and platforms. The data-rich digital realm enables targeted advertising, becoming a cornerstone revenue diversification strategy.

The consumer preference for digital/subscription services over linear pay-TV has compelled media firms to evolve business models, such as offering attractively priced "skinny bundles" to capture cost-conscious viewers.

Surging broadband Internet demand catalyzes growth for industry leaders like Rogers Communications and Charter. Faster speeds foster consumer appetite for high-quality streaming video and binge-watching. The strengthening global broadband ecosystem, coupled with smart TV proliferation, creates a fertile environment for media companies delivering engaging digital experiences to flourish as consumers crave seamless, premium content.

Continuous investment in technology, content innovation and strategic partnerships separate the media winners, capitalizing on this generational digital shift.

How to Make the Right Pick?

With the existence of a number of industry players, finding media stocks that have the potential to beat earnings estimates can be daunting. Our proprietary methodology, however, makes it fairly simple.

You could narrow down your choices by looking at stocks that have the perfect combination of two key elements: a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP is our proprietary methodology for determining stocks that have maximum chances of beating estimates at their next earnings announcement. It is the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate.
Our research shows that for stocks with this favorable mix of ingredients, the odds of an earnings surprise are as high as 70%.

Best Bets

Given below are two media stocks that have the favorable combination to beat on earnings this reporting cycle:

Disney is slated to report second-quarter fiscal 2024 results on May 7. The company currently has an Earnings ESP of +2.50% and carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Disney has been benefiting from a solid revival in the domestic and international theme park businesses. After weathering the challenges posed by the pandemic, Disney's theme park division has witnessed a remarkable revival. The company's strategic investments in captivating new attractions have paid off handsomely. The unveiling of the highly anticipated Frozen-themed land at Hong Kong Disneyland and Walt Disney Park in Paris, along with the enchanting Zootopia-themed area at Shanghai Disney, has sparked renewed interest and drawn crowds from around the globe. These immersive experiences have rejuvenated the theme park business, contributing significantly to Disney's overall growth.

Disney's commitment to sports streaming has emerged as a key growth catalyst, particularly through its flagship platform, ESPN+. ESPN has reached an understanding with FOX and Warner Bros. Discovery, on principal terms, to form a new joint venture (JV) for building an innovative new platform to house a compelling streaming sports service. The company's strategic emphasis on live sports content has resonated with viewers, driving viewership and subscriber growth. The renewal of the MLB sports rights deal through 2028 and the agreement with the prestigious Spanish club football league, La Liga, have further solidified Disney's position as a powerhouse in sports entertainment.

The Zacks Consensus Estimate for earnings has moved north by 4.8% to $1.09 per share in the past 30 days.

The Walt Disney Company Price and EPS Surprise

The Walt Disney Company Price and EPS Surprise

The Walt Disney Company price-eps-surprise | The Walt Disney Company Quote

Paramount Global is slated to report first-quarter 2024 results on Apr 29. The company currently has an Earnings ESP of +9.45% and carries a Zacks Rank #3.

Paramount Global's streaming offerings have captured the attention of audiences worldwide, driving a significant spike in viewership. The company's diverse portfolio of streaming services, both advertising and subscription-based, has enabled it to cater to a wide range of audience preferences. The company has been riding on a remarkable surge in viewership for its streaming services and the strong adoption of its flagship platform, Paramount+.

Pramount's robust content catalog, encompassing live sporting events and a diverse array of streaming services, has proved to be a winning formula. Services like CBS All Access, Showtime OTT, Pluto TV, Noggin, and BET+ have collectively contributed to this viewership boom, catering to diverse tastes and preferences across various audience segments.

At the forefront of Paramount Global's streaming success is the highly anticipated launch of Paramount+ with SHOWTIME plan. This cornerstone integration has positioned Paramount+ as the new streaming home for the prestigious SHOWTIME network, offering a seamless and elevated viewing experience for subscribers. The Showtime streaming service will, however, be terminated on Apr 30, 2024.

The Zacks Consensus Estimate for earnings has moved north by 9.7% to 34 cents per share in the past 30 days.

Paramount Global Price and EPS Surprise

Paramount Global Price and EPS Surprise

Paramount Global price-eps-surprise | Paramount Global Quote

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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