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Bear of the Day

Grupo Televisa, S.A. (TV - Free Report) is the leading media company in the Spanish-speaking world. The company runs four television networks in Mexico. They also have interests in TV production, broadcasting, international distribution of television programming and direct-to-home (DTH) satellite services among others.
 
They export their programs to the US through Univision and to other TV networks in over 50 countries.
 
Disappointing Results
 
The company reported lackluster financial results for Q3 2016. Net income came in at approximately $70.8 million, down 79.6% year over year. Earnings per Global Depository Shares (GDS) were 12 cents, significantly short of the Zacks Consensus Estimate of 20 cents.
 
According to the management, the depreciation of the peso had an impact on their operations particularly on CapEx, which are primarily in the US dollars. The company plans to reduce CapEx for 2017, given the weakness of the peso.
 
The stock fell more than 4% after the report.

Downward Revisions
 
After weak results, analysts have slashed their estimates for the company. Zacks Consensus Estimates for the current and the next fiscal year are now $0.51 per share and $0.73 per share respectively, down from $0.66 per share and $0.85 per share, before the results.
 
The company had an average negative quarterly surprise of 49% for the last four quarters.
 
The Bottom Line
 
While the company has a leading position in Spanish language content and pay-TV industry in Mexico, there are growing headwinds for the company.
 
While consumption in Mexico had remained strong so far, growth estimates for the economy have been coming down. Further there is a lot of uncertainty surrounding the potential impact of US trade and immigration policy changes on the Mexican economy after the US presidential election.
 
The Mexican telecom regulator had identified Televisa as a dominant player in the broadcast TV market.  Thus, the company may face more stringent regulatory measures, going forward.
 
Also, the new reform bill of the Mexican government will allow America Movil to enter the broadcasting market of Mexico, which has been dominated by Televisa for a long time. This would hurt Televisa’s advertisement revenues.
 
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