World Wrestling Entertainment (WWE) Q1 Earnings: What's Up?

World Wrestling Entertainment, Inc. (NYSE:WWE) is scheduled to report first-quarter 2017 financial numbers, before the opening bell on May 4. In the previous quarter, the company reported in-line earnings.

Notably, the company’s earnings have missed the Zacks Consensus Estimate in the trailing four quarters by an average of 11.5%. Here’s a discussion on the determinants of the first-quarter results.

What to Expect?

The question lingering in investors’ minds now is whether World Wrestling Entertainment will be able to post positive earnings surprise in the quarter to be reported. The current Zacks Consensus Estimate for the quarter under review is 11 cents, reflecting a year-over-year decrease of over 41%. We note that the Zacks Consensus Estimate has declined by a couple of cents in the past 30 days. Analysts polled by Zacks expect revenues of $182.1 million compared with $171.1 million reported in the year-ago quarter.

We noted that the stock has outperformed the Zacks categorized Movie/TV Production/Distribution industry in the past three months and the S&P 500 Index. The company’s shares have gained 8.7%, while the Zacks categorized industry declined 3.1%.

Factors Influencing This Quarter

In two out of the preceding three quarters, WWE missed the Zacks Consensus Estimate and consequently analysts are skeptical about the company’s performance in first-quarter 2017. WWE operates in the highly competitive market of entertainment video. Further, decline in pay-per-view revenues over the past few years is another major concern. Launch of the WWE Network was responsible for this sharp decline in pay-per-view revenues.

For first-quarter 2017, WWE anticipates average paid subscribers of 1.48 million, signifying a year-over-year increase of nearly 15% and sequential gain of 5%. Adjusted OBIDA is projected in the range of $23–$27 million. Further, WWE expects contractual rise in television right fees from important distribution agreements and believes that the company will continue to add more WWE Network subscribers but at a lower rate on a year-over-year basis.

In order to boost WWE Network’s revenues, it has been implementing certain strategies, which include developing fresh content, executing customer acquisition and retention programs. The company is also increasing distribution platform, introducing new features and foraying in to new locations. These initiatives are anticipated to boost the company’s revenue higher.

Zacks Model Shows Unlikely Beat

Our proven model does not conclusively show that WWE 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 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. WWE has an Earnings ESP of 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 11 cents. The company carries a Zacks Rank #4. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

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

Stocks Poised to Beat Earnings Estimates

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Best Buy Co. Inc. (NYSE:BBY) has an Earnings ESP of +12.50% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Lowe's Companies, Inc. (NYSE:LOW) has an Earnings ESP of +2.83% and a Zacks Rank #2.

L Brands, Inc. (NYSE:LB) has an Earnings ESP of +4.17% and a Zacks Rank #3.

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