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Discovery Communications, Inc. (DISCA - Analyst Report) is slated to report its fourth-quarter 2013 financial results before the opening bell on Feb 13, 2014.

In the last quarter, the company delivered a 9.59% positive earnings surprise. Let’s see whether the situation has changed in the fourth quarter.

Factors to Be Considered This Quarter

Discovery is a pure-play non-fiction TV content developer. The non-fiction media market is highly competitive and as a leading player of this segment, Discovery faces fierce competition.

The company’s national TV networks compete with other broadcast and national TV networks as well as with home video products and Internet usage for viewers. The company is highly susceptible to changes in distribution and viewing of TV channels.

Discovery is suffering from customer concentration risks. In the U.S., the top 10 distributors accounted for nearly 90% of the company’s total distribution revenue. Similarly, in international markets, the top 10 distributors generate more than 50% of the company’s distribution revenues. Loss of any of these distributors will have significant material impact on the company’s finances.

Earnings Whispers

Our proven model does not conclusively show that Discovery Communications is likely to beat the Zacks Consensus Estimate 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. Unfortunately, this is not the case here as elaborated below.

Positive Zacks ESP: Earnings ESP represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate. This leads to an ESP of +1.14% for Discovery Communications as the Most Accurate estimate stands at $0.89 while the Zacks Consensus Estimate is lower at $0.88.

Zacks Rank #4 (Sell): Discovery Communications’ Zacks Rank #4, decreases the predictive power of ESP.

We caution investors against the stock going into the earnings announcement, as a Zacks earnings ESP of +1.14% combined with a Zacks Rank #4 lowers the possibility of an earnings surprise.

Other Stocks to Consider

Here are some companies to consider as our model shows these have the right combination of elements to post an earnings beat this quarter.

AMC Networks Inc. (AMCX - Snapshot Report) has earnings ESP of +5.2% and carries a Zacks Rank #3 (Hold).

Baidu, Inc. (BIDU - Snapshot Report) has earnings ESP of +6.34% and carries a Zacks Rank #1 (Strong Buy).

Akamai Technologies, Inc. (AKAM - Analyst Report) has earnings ESP of +7.32% and carries a Zacks Rank #1.

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