Will Madison Square Garden (MSG) Beat Earnings Estimates in Q1? - Analyst Blog

We expect The Madison Square Garden Company ( MSG ) to beat expectations when it reports fiscal first quarter 2015 results on Oct 31. Last quarter, the company posted a negative earnings surprise of 34.78%. Let us see what's in store for this quarter.

Why a Likely Positive Surprise?

Our proven model shows that Madison Square Garden is likely to beat earnings because it has the right combination of two key components.

Zacks ESP:Earnings ESP , which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +3.23%. This is a very meaningful and leading indicator of a likely positive earnings surprise.

Zacks Rank: MSG has a Zacks Rank #2 (Buy). Note that stocks with Zacks Rank #1, 2 and 3 have a significantly higher chance of beating earnings. Meanwhile, the Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.

The combination of Madison Square Garden's Zacks Rank #2 and +3.23% ESP makes us confident of an earnings beat.

What is Driving the Better-Than-Expected Earnings?

MSG's revenues have beaten the Zacks Consensus Estimate throughout fiscal 2014 and increased year over year. The upside in revenues reflects higher event-related revenues at all of the company's venues, led by The Theater at Madison Square Garden, the Madison Square Garden Arena, the Forum and The Chicago Theatre, as well as higher venue-related sponsorship revenues. Also, higher event-related revenues from live sporting events have been contributing to the top line.

With a strong portfolio of strategically aligned venues, content and distribution channels, we believe that the company remains well positioned. The company continues to create exciting live experiences by organizing a wide range of special events of popular international performers. Given the company's initiatives, we expect it to continue to post strong revenues in fiscal first quarter 2015.

The coverage of summer programs which include Major League Soccer's New York Redbulls, the Knicks Summer League as well as exclusive coverage of the New York Giants' training camp would keep the revenue graph high in the first quarter.

However, an increasing number of events would automatically lead to an increase in expenses. This would keep earnings and adjusted operating cash flow (an appropriate measure for evaluating the operating performance per the company) under pressure as has been the case over the past two quarters.

Other Stocks to Consider

Other stocks in the broader consumer discretionary sector that have both a positive earnings ESP and a favorable Zacks Rank are:

The Walt Disney Company ( DIS ) has an Earnings ESP of +3.41% and a Zacks Rank #2.

Isle of Capri Casinos, Inc. ( ISLE ) has an Earnings ESP of +40.00% and a Zacks Rank #2.

Pinnacle Entertainment Inc. ( PNK ) has an Earnings ESP of +4.55% and a Zacks Rank #3 (Hold).

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MADISON SQUARE (MSG): Free Stock Analysis Report

PINNACLE ENTRTN (PNK): Free Stock Analysis Report

ISLE OF CAPRI (ISLE): 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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