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Will DreamWorks Animation (DWA) Disappoint This Earnings Season?

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DreamWorks Animation SKG Inc. is slated to report fourth-quarter 2013 earnings after the closing bell on Feb 25, 2014.

In the last quarter, the company earnings beat the Zacks Consensus by a wide margin. The Zacks Consensus Estimate was a break-even per share while reported earnings were 12 cents. Let’s see how things are shaping up for this announcement.

Factors to be Considered this Quarter

We expect the animated feature film producer’s revenues to remain under pressure due to declining sales from domestic releases like Turbo and Croods. While Turbo was a comedy sports film, Croods happened to be an adventure comedy movie. Both the films could not match the success of Madagascar 3, released in 2012.

On the encouraging side, the company is looking to expand its business. In the previous quarter, the company diversified into four different parts, namely, films, consumer products, TV and others. Recently, DreamWorks Animation also unveiled a news business called Dreamworks Press. It will publish digital and print books inspired by the U.S. film studio library.    

Earnings Whispers

Our proven model does not conclusively show that DreamWorks Animation 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, 2 or 3 for this to happen. Unfortunately, this is not the case here as elaborated below.

Zacks ESP: This is because the Most Accurate estimate stands at $0.33 while the Zacks Consensus Estimate is higher at $0.34. This leads to an ESP of -2.94% for DreamWorks Animation.

Zacks Rank: DreamWorks Animation’s Zacks Rank #1 (Strong Buy), however, increases the predictive power of ESP.

We caution investors against the stock going into the earnings announcement, as a Zacks earnings ESP of -2.94% combined with a Zacks Rank #1 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.

Liberty Media Corporation has earnings ESP of +62.96% and carries a Zacks Rank #3 (Hold).

Cablevision Systems Corporation has earnings ESP of +33.33% and carries a Zacks Rank #3.

Six Flags Entertainment Corporation (SIX - Free Report) has earnings ESP of +3.08% and carries a Zacks Rank #1.

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