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Will Time Warner's (TWX) Initiatives Drive Q2 Earnings Beat?

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We expect Time Warner Inc. (TWX - Free Report) , a media and entertainment company, to beat expectations when it reports second-quarter 2014 results on Aug 6. In the last quarter, it posted a positive surprise of 3.4%.

Why a Likely Positive Surprise?

Our proven model shows that Time Warner Inc. is likely to beat earnings estimate this quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 or 2 or 3 for this to happen. Time Warner has the right combination of two key components. 

Zacks ESP: Time Warner currently has an Earnings ESP of +1.19%. This is because the Most Accurate estimate stands at 85 cents, while the Zacks Consensus Estimate is pegged at 84 cents.

Zacks Rank: The company carries a Zacks Rank #3 (Hold). Note that stocks with a Zacks Ranks of #1, 2 and 3 have a significantly higher chance of beating earnings estimates. The Sell-rated stocks (Rank #4 and 5) should never be considered going into an earnings announcement.

The combination of Time Warner’s Zacks Rank #3 and +1.19% Earnings ESP makes us confident of earnings beat this release.

What is Driving the Better-than-Expected Earnings?

We believe Time Warner’s initiatives such as foray into new markets, divestment activities and digital endeavors augur well for its operating performance in the quarter to be reported. Moreover, the company’s investments in programming, production and marketing, as well as its focus on operating and capital efficiencies bode well. Also, the company has been expanding its digital presence to facilitate consumers with contents on more platforms and devices.

In the last four quarters, Time Warner outperformed the Zacks Consensus Estimate by an average of 7.3%.

Stocks That Warrant a Look

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

Chipotle Mexican Grill, Inc. (CMG - Free Report) has an Earnings ESP of +0.79% and a Zacks Rank #1 (Strong Buy).

Abercrombie & Fitch Co. (ANF - Free Report) has an Earnings ESP of +20.00% and a Zacks Rank #2 (Buy).

Macy’s Inc. (M - Free Report) has an Earnings ESP of +1.16% and a Zacks Rank #3.

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