Silver Spring, MD-based global mass media and entertainment company, Discovery Communications, Inc. ( DISCA ) is slated to report its first-quarter 2014 financial results before the opening bell on May 6, 2014.
Last quarter, the company had delivered a 4.55% positive earnings surprise. Let's see how Discovery Communications is positioned prior to the first quarter's announcement.
Factors to be Considered this Quarter
Robust revenue and viewership growth coupled with rating improvement have encouraged Discovery Communications to raise its guidance for 2014. The company has renewed its agreement with Time Warner Cable to continue offering its content on the latter's TVEverywhere platform. Such video streaming deals with pay-TV operators should add a revenue stream for Discovery Communications in the upcoming quarters.
Discovery Communications is a pure-play, non-fiction TV content developer. The non-fiction media market is highly competitive and as a leading player in this segment, Discovery Communications faces fierce competition. The company's national TV network competes with other broadcast and national TV networks as well as with home video products and Internet usage for viewers. However, the company is highly susceptible to changes in distribution and viewing of TV channels.
On the flip side, massive growth of personal digital video recorders (DVRs), video-on-demand technology, IPTV, smartphones and tablets may completely change the TV viewing landscape, which in turn may jeopardize the company's business model.
Our proven model does not conclusively show that Discovery Communications is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here as elaborated below.
Negative Zacks ESP: Earnings ESP represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate. This leads to an ESP of -7.04% for Discovery Communications as the Most Accurate estimate stands at 66 cents while the Zacks Consensus Estimate is pegged higher at 71 cents.
Zacks Rank: Discovery Communications holds a Zacks Rank #4 (Sell) which decreases the predictive power of the stock.
We caution investors against this stock going into the earnings announcement, as a Zacks earnings ESP of -7.04% when combined with a Zacks Rank #4, lowers the possibility of an earnings surprise.
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:
BlackBerry Limited ( BBRY ), with earnings ESP of +21.43% and a Zacks Rank #2 (Buy).
The Walt Disney Company ( DIS ), with earnings ESP of +1.03% and a Zacks Rank #2 (Buy).
Cablevision Systems Corporation ( CVC ), with earnings ESP of +100.0% and a Zacks Rank #3 (Hold).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.