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What's in Store for Comcast (CMCSA) this Earnings Season?
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Comcast Corp. (CMCSA - Free Report) , the leading cable multi-service operator (MSO) in the U.S., is slated to report second-quarter 2016 financial numbers before the opening bell on Jul 27.
Last quarter, Comcast posted a positive earnings surprise of 6.33%. However, the company’s earnings surpassed the Zacks Consensus Estimate in only one out of the previous four quarters, with an average beat of 1.28%. Let’s see how things are shaping up for this announcement.
The company’s Cable business is doing well and the NBC Universal segment is also witnessing significant improvement. The deal to acquire DreamWorks Animation bodes well and should help fend off competition. Also, Comcast is investing heavily in its theme park business. The company has forayed into the over-the-top video delivery market with the launch of its Internet TV service “Stream” and aims to check customer churn and provide viewers with more streaming options and flexibility at breakthrough prices.
However, intensifying competitive threat, consolidation-related woes, mounting programming costs and a highly leveraged balance sheet are potent headwinds. While Comcast’s Stream TV is an attractive offering for customers, an FCC intervention into its legitimacy may jeopardize the prospects of the zero-rating plan, potentially affecting the company. Moreover, loss of NBC Universal’s programming distribution agreements, or the renewal of these agreements on less favorable terms, could affect its businesses. Additionally, within the segment Filmed Entertainment, revenues were down 4.3% year over year in the first quarter.
Earnings Whispers
Our proven model does not conclusively show that Comcast 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, that is not the case here as elaborated below.
Zacks ESP: Comcast has an earnings ESP of -1.22%. This is because the Most Accurate estimate stands at 81 cents while the Zacks Consensus Estimate is pegged higher at 82 cents.
Zacks Rank: Comcast has a Zacks Rank #3 which increases the predictive power of ESP. However, the company’s negative ESP makes surprise prediction difficult.
Meanwhile, 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 momentum.
Stocks to Consider
Here are some companies to consider instead as our model shows that they have the right combination of elements to post an earnings beat this quarter.
Open Text Corporation (OTEX - Free Report) , with an earnings ESP of +1.10% and a Zacks Rank #1.
LG Display Co. Ltd. (LPL - Free Report) , with an earnings ESP of +50.00% and a Zacks Rank #2.
Charter Communications Inc. (CHTR - Free Report) , with an Earnings ESP of +404.76% and a Zacks Rank #2.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
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What's in Store for Comcast (CMCSA) this Earnings Season?
Comcast Corp. (CMCSA - Free Report) , the leading cable multi-service operator (MSO) in the U.S., is slated to report second-quarter 2016 financial numbers before the opening bell on Jul 27.
Last quarter, Comcast posted a positive earnings surprise of 6.33%. However, the company’s earnings surpassed the Zacks Consensus Estimate in only one out of the previous four quarters, with an average beat of 1.28%. Let’s see how things are shaping up for this announcement.
COMCAST CORP A Price and EPS Surprise
COMCAST CORP A Price and EPS Surprise | COMCAST CORP A Quote
Factors at Play
The company’s Cable business is doing well and the NBC Universal segment is also witnessing significant improvement. The deal to acquire DreamWorks Animation bodes well and should help fend off competition. Also, Comcast is investing heavily in its theme park business. The company has forayed into the over-the-top video delivery market with the launch of its Internet TV service “Stream” and aims to check customer churn and provide viewers with more streaming options and flexibility at breakthrough prices.
However, intensifying competitive threat, consolidation-related woes, mounting programming costs and a highly leveraged balance sheet are potent headwinds. While Comcast’s Stream TV is an attractive offering for customers, an FCC intervention into its legitimacy may jeopardize the prospects of the zero-rating plan, potentially affecting the company. Moreover, loss of NBC Universal’s programming distribution agreements, or the renewal of these agreements on less favorable terms, could affect its businesses. Additionally, within the segment Filmed Entertainment, revenues were down 4.3% year over year in the first quarter.
Earnings Whispers
Our proven model does not conclusively show that Comcast 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, that is not the case here as elaborated below.
Zacks ESP: Comcast has an earnings ESP of -1.22%. This is because the Most Accurate estimate stands at 81 cents while the Zacks Consensus Estimate is pegged higher at 82 cents.
Zacks Rank: Comcast has a Zacks Rank #3 which increases the predictive power of ESP. However, the company’s negative ESP makes surprise prediction difficult.
Meanwhile, 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 momentum.
Stocks to Consider
Here are some companies to consider instead as our model shows that they have the right combination of elements to post an earnings beat this quarter.
Open Text Corporation (OTEX - Free Report) , with an earnings ESP of +1.10% and a Zacks Rank #1.
LG Display Co. Ltd. (LPL - Free Report) , with an earnings ESP of +50.00% and a Zacks Rank #2.
Charter Communications Inc. (CHTR - Free Report) , with an Earnings ESP of +404.76% and a Zacks Rank #2.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>