Will Higher Costs Hurt Scripps Networks' (SNI) Q4 Earnings?
Scripps Networks Interactive, Inc.SNI is scheduled to release fourth-quarter 2016 financial numbers, before the opening bell, on Feb 21.
In the third quarter of 2016, Scripps Networks posted a positive earnings surprise of 35.48%. In fact, the company boasts an impressive history with respect to earnings. Scripps Networks outpaced the Zacks Consensus Estimate in each of the last four quarters with an average earnings beat of 27.89%.
However, matters are not so much in favor of this Cincinnati, OH-based company in the fourth quarter. This is clearly indicated by the 1.9% decline in the Zacks Consensus Estimate over the last 30 days. Furthermore, Scripps Networks has underperformed the Zacks categorized Broadcast Radio and Television industry in the last month. The stock has gained 2.77% compared with the industry's gain of 5.85% in the period.
Our quantitative model too does not hint at an earnings beat in the fourth quarter. This is because the company lacks the perfect combination of two key ingredients - a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) - to increase its odds of an earnings surprise.
Zacks Rank: Scripps Networks sports a Zacks Rank #1. You can see the complete list of today's Zacks #1 Rank stocks here .
Zacks ESP: The Earnings ESP for Scripps Networks is -2.86%. This is because the Most Accurate estimate is pegged at $1.02 per share while the Zacks Consensus Estimate is 3 cents higher.
In spite of the company's favorable Zacks Rank, its negative Earnings ESP makes surprise prediction difficult. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .
Factors Likely at Play
We expect the company's fourth-quarter results to be hurt by headwinds like foreign exchange woes and escalating costs. Scripps Networks' high debt levels is another concern.
In the fourth quarter, the company extended its agreement with Tribune Media Company TRCO . Although positive on Scripps Networks' growth-by-acquisition strategy, we note that that the strategy has integration risks attached to it. Nonetheless, we appreciate the company's efforts to reward shareholders through buy backs and dividend payouts.
We expect the strong growth in Advertising revenues to continue in the fourth quarter, thereby improving the top line. However, Distribution revenues might be weak in the fourth quarter due to erosion in subscriber base.
Scripps Networks Interactive, Inc Price and EPS Surprise
Stocks to Consider
Here are some companies in the broader Consumer Discretionary space that have the right combination of elements to post an earnings beat this quarter.
Cinemark Holdings Inc. CNK has an Earnings ESP of +2.38% and a Zacks Rank #3. The company is scheduled to release its fourth-quarter 2016 results on Feb 23.
Pinnacle Entertainment, Inc. PNK has an Earnings ESP of +57.14% and a Zacks Rank #3. The company is set to release its fourth-quarter 2016 results on Feb 22.
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