Time Inc.TIME is slated to report first-quarter 2016 results on May 5, before the opening bell. In the last quarter, it delivered a negative earnings surprise of 15.9%. However, in the trailing four quarters, the company outperformed the Zacks Consensus Estimate by an average of 45.1%. Let's see how things are shaping up for this announcement.
Zacks Model Shows Unlikely Earnings Beat
Our proven model does not conclusively show that Time Inc. is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. Time Inc. has an Earnings ESP of -60.00% as the Most Accurate estimate stands at a loss of 16 cents, while the Zacks Consensus Estimate is pegged at a loss of 10 cents. Moreover, the company carries a Zacks Rank #4 (Sell). We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Factors Influencing this Quarter
Time Inc. has been focusing on the creation of digital properties and intends to increase its digital advertising revenues by enhancing native branded content and video. The company is also concentrating on customization of data to help advertisers target their audience more effectively. In this connection, the company acquired the assets of Viant. Management anticipates Viant to contribute about $100 million of digital advertising revenue in 2016. There has been a drastic change in audience preference due to which advertisers have shifted dollars to digital video.
We observe that total advertising revenue declined 2.4% during the final quarter of 2015, wherein print and other advertising revenue fell 7%, partially offset by digital advertising revenue that jumped 17%. Consequently, Time Inc. is targeting adjacent revenue opportunities, which include Live Media, SI Play, e-commerce and various other products. Further, Time Inc. has acquired inVNT, a company that specializes in live media.
For the first quarter of 2016, management had earlier projected total revenue to be flat to down in the low-single digits year over year. Time Inc. envisions advertising revenue to be flat to down in the low-single digits year over year and subscription revenue to decline in the low-single digits, with newsstand revenue falling in the high-single digits. Operating expenses are projected to increase in the low-single digits year over year.
Stocks Poised to Beat Earnings Estimates
Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:
Discovery Communications, Inc. DISCA has an Earnings ESP of +2.22% and a Zacks Rank #3 (Hold).
Nexstar Broadcasting Group, Inc. NXST has an Earnings ESP of +19.40% and a Zacks Rank #3.
Alibaba Group Holding Limited BABA has an Earnings ESP of +23.68% and a Zacks Rank #3.