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5 Media Stocks Set for Stellar Earnings in Q3

The media industry is witnessing rapid evolution in alternative distribution channels for broadcast and cable programming. Decline in ratings for broadcast television, reduction in demand for home entertainment theatrical content and narrowing subscriber base have dealt a blow to the industry.

Industry participants are investing heavily to develop original and fresh content. Meanwhile, maintenance of low pricing due to stiff competition from streaming and on-demand video service providers is hurting the top line.

Consumer's unfavorable disposition toward advertising has also hit the industry hard. Growing preference for digital and subscription services in place of linear pay television and rental or outright purchase has also compelled media companies to alter their business models.

Media companies are now offering a variety of alternative packages, including skinny bundles, at lower costs than traditional offerings. They are also being creative on the content part to keep up with streaming service providers.

Factors That Will Make or Break

The media industry has been battling persistent cord-cutting and stiff competition from streaming services like Netflix, Hulu, HBO and Amazon Prime. Increasing programming costs and retransmission fees are also expected to drag down profits.

Nevertheless, strong demand for political advertising in the United States is likely to drive results for the media industry. Furthermore, increasing investments in original content and focus on providing quality entertainment should work in favor of media companies in the near term.

These, to an extent, reflect on Invesco Dynamic Media ETF's (PBS) year-to-date return of 5.6% against the S&P 500 Composite's decline of 0.6%.

How to Make the Right Pick?

The existence of a number of industry players makes it difficult to decide on the right media stocks that have the potential to beat earnings. Our proprietary methodology, however, makes it fairly simple.

You could narrow down the list of choices by looking at stocks that have the combination of a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP .

Earnings ESP is our proprietary methodology for determining stocks that have the best chance to surprise with their next earnings announcement. It provides the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate.

Our research shows that for stocks with this combination, the chance of a positive earnings surprise is as high as 70%.

Our Choices

Given below are five media stocks that have the perfect combination of elements to come up with an earnings beat this quarter:

Cincinnati, OH-based The E.W. Scripps CompanySSP is expected to report third-quarter 2018 results on Nov 9. Currently, the company has an Earnings ESP of +3.03% and a Zacks Rank #1. You can see the complete list of today's Zacks #1 Rank stocks here .

E.W. Scripps is likely to benefit from political advertising-related spending. The midterm elections in 2018 will see a series of contests in states like Florida, Nevada and Ohio, where the company has a strong hold.

E.W. Scripps Company (The) Price and EPS Surprise

E.W. Scripps Company (The) Price and EPS Surprise | E.W. Scripps Company (The) Quote

DiscoveryDISCA is set to report third-quarter 2018 results on Nov 8. This Silver Spring, MD-based company also has a favorable combination of a Zacks Rank #3 and an Earnings ESP of +11.07%. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.

The company is likely to gain from its content portfolio strength. The Scripps buyout has not only expanded Discovery's content portfolio but also its international footprint, especially in regions like Europe, Latin America and the Nordics.

Discovery Communications, Inc. Price and EPS Surprise

Discovery Communications, Inc. Price and EPS Surprise | Discovery Communications, Inc. Quote

Further, partnerships with the likes of AT&T, Hulu, Sling TV and Bilibili are helping Discovery rapidly penetrate the online viewing audience. This is expected to drive advertising revenues.

DisneyDIS is scheduled to report fourth-quarter fiscal 2018 results on Nov 8. The Burbank, CA-based company is expected to benefit from robust collections of Avengers: Infinity War and Incredibles 2 .

The media giant's continued investments in Parks & Resorts (33.5% of second-quarter revenues) are also reaping benefits. Moreover, ESPN+ recorded one million subscribers within a short span of time reflecting solid demand for the company's sports streaming service.

The Walt Disney Company Price and EPS Surprise

The Walt Disney Company Price and EPS Surprise | The Walt Disney Company Quote

Disney has an encouraging combination of a Zacks Rank #3 and an Earnings ESP of +3.82%.

Los Gatos, CA-based RokuROKU is expected to report third-quarter 2018 results on Nov 7. Currently, the company has an Earnings ESP of +18.52% and a Zacks Rank #3.

The company is likely to benefit from growing adoption of its ad-supported, video-on-demand channel. Moreover, increasing customer base, launches and rising search volumes bode well.

Roku, Inc. Price and Consensus

Roku, Inc. Price and Consensus | Roku, Inc. Quote

New York-based ViacomVIAB currently has a Zacks Rank #3 and an Earnings ESP of +0.33%. The company is slated to report third-quarter 2018 results on Nov 16.

Viacom Inc. Price and EPS Surprise

Viacom Inc. Price and EPS Surprise | Viacom Inc. Quote

The company is likely to benefit from household subscriber growth in international business, driven by channel launches in the United Kingdom and Poland. Additionally, turnaround in Paramount and MTV divisions, expanding digital presence and international strength are key catalysts.

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The Walt Disney Company (DIS): Free Stock Analysis Report

Viacom Inc. (VIAB): Free Stock Analysis Report

Discovery Communications, Inc. (DISCA): Free Stock Analysis Report

E.W. Scripps Company (The) (SSP): Free Stock Analysis Report

Roku, Inc. (ROKU): Free Stock Analysis Report

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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.


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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