A Look At Media Stocks Earnings Slated For Aug 8: NWSA, GAIA

We have now left the bulk of the Q2 earnings season behind us. Per the latest Zacks Earnings Trends report as of Aug 4, out of the 414 S&P 500 members that have come up with their quarterly numbers, approximately 70% have posted positive earnings surprises, while a little over 50% beat top-line expectations.

According to the report, earnings for the 414 S&P 500 companies that have reported so far are down 4.5% from the same period last year, while revenues have dropped 1%.

The report further projects that earnings for the total S&P 500 companies will decline 3.1% from the year-ago period, and total revenue will dip 0.4%. We observe that this reporting cycle will be the fifth straight quarter in which the index witnesses a decline in earnings.

The performance of the index is not restricted to a single sector, and of the 16 Zacks sectors, 7 are expected to witness an earnings decline in Q2, with Basic Materials, Industrial Products, Oil/Energy, Aerospace, Finance and Transportation being a big drag. However, the Consumer Discretionary sector has been portraying strength.

Total earnings for the Consumer Discretionary sector are expected to increase 4.6%, whereas revenues are anticipated to jump 3.2%. As of Aug 4, 71.4% of the total number of S&P 500 companies in this sector had reported their results, wherein 88% delivered an earnings beat and about 44% cruised ahead of revenue estimates. While earnings grew 2.5% year over year, revenues improved 1.8%.Media stocks form part of the Consumer Discretionary sector.

Among media stocks lined up to report, let’s take a sneak peek at two companies.

News Corporation (NASDAQ:NWSA) , the diversified media conglomerate, is slated to report fourth-quarter fiscal 2016 results on Aug 8. The company is in a transitionary phase, looking to diversify its revenue streams through strategic acquisitions and operational enhancement. The company is expanding its digital offerings, along with greater emphasis on real estate businesses. However, foreign currency headwinds, soft advertising demand and lower revenues at its Book Publishing and Cable Network Programming divisions raise concerns. Total advertising revenue fell 10% during the third quarter of fiscal 2016. Advertising revenue declined across the company’s News and Information Services segment. (Read: News Corp. Q4 Earnings: Will the Stock Disappoint?)

Our proven model does not conclusively show that News Corporation is likely to beat earnings 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. News Corporation has an Earnings ESP of -14.29% as the Most Accurate estimate is 12 cents, while the Zacks Consensus Estimate is pegged at 14 cents. News Corporation’s Zacks Rank #3 (Hold) increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise. In the trailing four quarters, the company missed the Zacks Consensus Estimate by an average of 9.2%.

Another stock, Gaia, Inc. (NASDAQ:GAIA) is scheduled to report second-quarter 2016 results on Aug 8. This lifestyle media company has an Earnings ESP of 0.00% and a Zacks Rank #3. The Zacks Consensus Estimate for the quarter currently stands at 10 cents. In the trailing four quarters, the company underperformed the Zacks Consensus Estimate by an average of 144.6%.