Is A Beat In The Cards For Viacom (VIAB) In Q2 Earnings?

New York-based, Viacom, Inc. (NASDAQ:VIAB) is slated to release second-quarter fiscal 2017 results on May 4, before the market opens.

In the last quarter, the company posted a positive earnings surprise of 25.30%. Moreover, the company surpassed the Zacks Consensus Estimate in three out of the last four quarters, with an average beat of 7.96%.

Over the last six months, Viacom’s shares gained 18.68%, slightly above the Zacks categorized Media Conglomerates industry’s gain of 18.04% over the same period.

Let’s see how things are shaping up for this announcement.

Why a Likely Positive Surprise?

Our quantitative model shows that Viacom is likely to beat earnings because it has the perfect combination of two key ingredients.

Zacks ESP: The Earnings ESP for Viacom is +3.39% with the Most Accurate estimate exceeding the Zacks Consensus Estimate of 59 cents per share by 2 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Viacom carries a Zacks Rank #3 (Hold). Note, that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings estimates. Conversely, a Zacks Rank #4 or 5 (Sell-rated stock) should never be considered going into an earnings announcement.

The combination of Viacom’s Zacks Rank #3 and a positive ESP makes us reasonably confident of an earnings beat.

Factors likely at Play

Viacom is expected to perform well in the second quarter of 2017 despite higher costs. The company is leaving no stone unturned to turn around its fortunes. In order to combat the challenges, Viacom unveiled a new strategic plan in Feb 2017. As part of the five-point plan, it intends to focus on six of its core brands -- BET, Comedy Central, MTV, Nickelodeon, Nick Jr. and Paramount.

However, Viacom's high debt levels remain a concern. The company currently has a trailing 12-month debt-equity ratio above 100%, much higher than the Zacks categorized Media Conglomerates industry’s ratio of 54.54%. The cable TV industry in the U.S. is highly matured and saturated. Viacom’s flagship cable channels are already distributed and therefore, chances are much limited to increase revenues by enlarging distribution channels.

Viacom Inc. Price and EPS Surprise

Viacom Inc. Price and EPS Surprise | Viacom Inc. Quote

Other Stocks to Consider

Investors interested in the broader consumer discretionary sector may also consider the following stocks. This is because our model shows that these companies possess the right combination of elements to post an earnings beat this quarter.

Adidas (DE:ADSGN) AG (OTC:ADDYY) has an Earnings ESP of +0.94% and a Zacks Rank #2. The company will report first-quarter results on May 4.

AMC Networks Inc. (NASDAQ:AMCX) has an Earnings ESP of +1.02% and a Zacks Rank #3. The company will report first-quarter results on May 4.

Central Garden & Pet Company (NASDAQ:CENT) an Earnings ESP of +4.69% and a Zacks Rank #2. The company will report fiscal second-quarter results on May 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

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