Nielsen (NLSN) To Report Q3 Earnings: Will It Surprise?

Nielsen Holdings plc (NYSE:NLSN) is set to report third-quarter 2017 results on Oct 25. Last quarter, the company delivered a negative earnings surprise of 24.24%.

Notably, Nielsen missed the Zacks Consensus Estimate in each of the trailing four quarters, with an average negative surprise of 26.48%.

Also, shares of Nielsen have lost 0.45% year to date, underperforming the industry’s 25.3% rally.

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

Watch Segment Strength to Drive Revenues

In the second quarter, Watch business revenues of $821 million contributed 50% to the total top line and were up 10.3% on a year-over-year basis. This figure is expected to increase in the to-be-reported quarter driven by continued strength in Audience Measurement and Marketing Effectiveness. The Zacks Consensus Estimate for Watch revenues is currently pegged at $845 million.

Partnerships & Agreements to Boost Results

Nielsen has been partnering with big companies to extend its TV ratings service beyond the Nielsen Local TV Ratings Service. Recently, Nilesen announced that it will start crediting Facebook (NASDAQ:FB), Alphabet (NASDAQ:GOOGL) owned YouTube and Hulu distributed video content through its Digital Content Ratings system launched in September last year. With the new move, both digital and TV publisher clients of Nielsen will be able to get a comprehensive view of the different ways their digital content is watched across these platforms. These partnerships will help Nielsen to expand its client base and boost its Watch segment revenues in the upcoming quarter.

Weakness in the Buy Segment Could Hurt Results

In the second quarter, Buy business revenues of $823 million declined 3.4% year over year and 2% on a constant-currency basis. The figure is further expected to decrease in the upcoming quarter due to softness in the U.S. market. The Zacks Consensus Estimate for Buy revenues is currently pegged at $798 million.

Increased Investments Could Weigh On Profits

In the last quarter, the company’s diluted net earnings of 50 cents per share, missed the Zacks Consensus estimate by 16 cents. Nielsen has been making continuous investments to expand its client base and increase its international presence. Although these investments will increase the company’s top-line figures, it is likely to impact the company’s bottom line in the upcoming quarter.

Earnings Whispers

Our proven model does not conclusively show that Nielsen is likely to beat on earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 69 cents. Therefore, Earnings ESP for Nielsen is 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Nielsencarries a Zacks Rank #3, which increases the predictive power of ESP. However, the company’s 0.00% ESP makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.

Stocks to Consider

Here are a few stocks you may want to consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter.

Applied Materials, Inc. (NASDAQ:AMAT) , with an Earnings ESP of +0.37% and Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Texas Instruments Incorporated (NASDAQ:TXN) , with an Earnings ESP of +0.07% and Zacks Rank #2.

Extreme Networks, Inc., (NASDAQ:EXTR) with an Earnings ESP of +9.75% and a Zacks Rank #3.

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