Media Stocks Earnings Lineup For May 8: DIS, DISCA & More

We are now at the business end of first-quarter 2018 earnings season with more than 409 S&P 500 members having already reported their quarterly numbers.

Per latest Earnings Preview, total earnings of these companies are up 24% on a year-over-year basis (78% of the companies beat EPS estimates) while total revenues are up 9.3% on a year-over-year basis (75.6% of the companies beat top-line estimates).

Overall first-quarter earnings for S&P 500 companies are anticipated to be up 23.2% from the year-ago quarter on revenues that are estimated to increase 8.7%. Growth is expected to be broad-based, with double-digit earnings improvement expectation for 13 out of the 16 Zacks Sector, including Consumer Discretionary.

Cord-Cutting Hurts Media Stocks

Media forms a significant part of the Consumer Discretionary sector. The industry has been suffering from relentless cord-cutting and stiff competition from streaming services like Netflix (NASDAQ:NFLX), Hulu, HBO and Amazon (NASDAQ:AMZN) Prime.

Except CBS, most of the well-known media companies like Comcast (NASDAQ:CMCSA) and Charter Communications (NASDAQ:CHTR) suffered from this trend.

Comcast lost 96K video customers and 54K voice customers in the first-quarter. (Read more: Comcast Beats on Q1 Earnings, Submits Bid for Sky)

Charter also lost 112K and 25K video and voice subscribers, respectively. (Read more: Charter Communications Q1 Earnings & Revenues Beat)

However, CBS added one million more subscribers in the quarter driven by increase in both traditional and direct-to-consumer distribution platforms. (Read more: CBS Q1 Earnings Beat Estimates, Non-Ad Revenues Grow Y/Y)

Let us take a look at five media companies that are set to report on May 8.

Disney’s (NYSE:DIS) second-quarter fiscal 2018 results are likely to benefit from the strong attendance at Parks & Resorts and robust collections from Black Panther.

The media giant’s continuing investment on Parks & Resorts (33.6% of first-quarter revenues) is reaping benefits. The company’s strategy of better-load balancing of attendance throughout the year is driving up the visitor growth rate figure.

Moreover, the stupendous success of Black Panther is likely to drive Studio (16.3% of first-quarter revenues) top-line growth in the second quarter.

However, falling subscriber base and higher programming costs at ESPN is a major concern. (Read more: Walt Disney to Report Q2 Earnings: What's in Store?)

The Zacks Consensus Estimate for second-quarter earnings is pegged at $1.68 per share reflecting 6.7% year-over-year growth.

Moreover, Disney has a favorable combination of a Zacks Rank #3 (Hold) and an Earnings ESP of +0.94%, which shows that the company is likely to deliver a positive surprise this quarter.

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 has a good chance of beating estimates if it also has a positive Earnings ESP. You can see the complete list of today’s Zacks #1 Rank stocks here.

The sell-rated stocks (Zacks Rank #4 or 5) are best avoided.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Discovery (NYSE:DIS) is also likely to deliver a positive earnings surprise in the first quarter of 2018 as it has the favorable combination of a Zacks Rank #3 and an Earnings ESP of +1.11%.

The company is expected to benefit from the completion of the Scripps Networks Interactive (NASDAQ:SNI) acquisition deal during the first quarter. The buyout widens Discovery’s international footprint, providing the audience with a varied range of Scripps’ brands, programming feed and talent.

Scripps Networks’ strong position in international markets like the U.K. and Poland will aid Discovery’s existing content pipeline.

The Zacks Consensus Estimate for first-quarter earnings is pegged at 45 cents per share. The figure has remained unchanged over the past seven days and reflects 21.6% year-over-year growth.

DISH Network (NYSE:DIS) is another stock that is likely to pull an earnings surprise in the first quarter of 2018.

The company’s efforts to diversify its business from being a pure-play satellite-TV operator to an Internet TV operator should help it counter competitive threats from low-cost video streaming operators.

DISH’s focus on providing an improved customer experience through the launch of new products as well as additional features is a positive.

However, the company continues to struggle with the persistent loss of subscribers due to stiff competition as well as rapid cord-cutting in the pay-TV industry. (Read more: DISH Network to Report Q1 Earnings: What's in Store?)

The Zacks Consensus Estimate for first-quarter earnings is pegged at 72 cents per share. The figure has remained unchanged over the past seven days and reflects 5.3% year-over-year decline.

Meanwhile, Liberty Global (NASDAQ:LBTYA) has an unfavorable combination of a Zacks Rank #3 and an Earnings ESP of 0.00%.

Liberty Global continues to grow in the Europe and Central America through several mergers and acquisitions and is looking for more takeover options to expand presence. The company looks strong on the back of stock repurchases and sale of its cable businesses.

However, the company’s significant exposure to sluggish growing European region remains a major concern primarily due to stiff competition in the video, broadband, fixed-line telephony and mobile services business.

The Zacks Consensus Estimate for first-quarter 2018 earnings is pegged at 8 cents per share. The figure has remained unchanged over the past seven days and reflects 124.24% year-over-year growth.

TEGNA (NYSE:TGNA) is also unlikely to deliver a positive earnings surprise in the first quarter of 2018 as it has an unfavorable combination of a Zacks Rank #3 and an Earnings ESP of -1.64%.

The company’s results are anticipated to be negatively impacted by intensifying competition in the broadcast TV industry along with declining advertising revenues.

Nevertheless, TEGNA’s strong content portfolio is a key positive. Currently, it is the largest independent television station group of major network affiliates in the top 25 markets. Being more focused on content creation rather than TV broadcasting, the media division shields the company from the prevailing cord-cutting threats in the pay-TV industry.

The Zacks Consensus Estimate for first-quarter earnings is currently pegged at 31 cents per share. The figure has remained unchanged over the past seven days and reflects 6.1% year-over-year decline.

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