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U.S. Media Industry in Trouble: 4 Stocks to Steer Clear Of
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The U.S. media and entertainment industry has long been grappling with declining advertising revenues and global economic volatility. The rising popularity of online sites over print media has also dealt a heavy blow to the industry, making the print-advertising model increasingly irrelevant. Cord cutting by TV viewers is also on the rise.
The media and entertainment industry is one of the rapidly changing areas in the economy. Massive technical changes in content creation, aggregation and distribution platforms have rendered the traditional business model unprofitable. Starting from interactive gaming, films, broadcast TV, print and publishing to live entertainment, social media, digital advertising; the media industry is evolving in a completely new way. These changes have made the survival of the incumbent media behemoths highly challenging.
Advertising remains a significant source of revenue for the media industry that in turn depends on the health of the economy. Advertising volumes are currently under pressure as advertisers refrain from making upfront commitments in an economy under recovery.
Spending on media continues to shift from traditional to digital products and services at an overwhelming pace. In general, digital advertising rates are comparatively lower than advertising rates in traditional media. As a result, advertisers can maintain or expand their reach through digital media by spending a portion of their budget. The growing adoption of digital media as the advertising platform has impeded advertising revenue growth in the traditional media companies.
The cable TV industry in the U.S. is highly matured and saturated. Most of the large media companies’ flagship cable channels are already distributed and therefore, chances of higher revenues are limited. In addition, the media industry is categorised as an intensely competitive one.
Zacks Industry Rank
Within the Zacks Industry classification, the Media Conglomerates industry is part of the Consumer Discretionary sector, which is one of 16 Zacks sectors. We rank all the 260 plus industries in the 16 Zacks sectors based on the earnings outlook and fundamental strength of the constituent companies in each industry. To learn more visit: About Zacks Industry Rank.
As a point of reference, the outlook for industries with Zacks Industry Rank #88 and lower is 'Positive,' between #89 and #176 is 'Neutral' and #177 and higher is 'Negative.' The Zacks Industry Rank for Media Conglomerates is #215. Analyzing the Zacks Industry Rank, it is apparent that the outlook on the Media Conglomerates industry is showcasing a Negative view.
Stocks to Avoid
At this stage, we believe investors should avoid stocks which carry an unfavorable Zacks Rank. Taking these factors into account, we present four stocks with either a Zacks Rank #5 (Strong Sell) or Zacks Rank 4 (Sell) which should be avoided at the moment.
Viacom Inc. : Viacom is a leading global entertainment content company whose family of prominent and respected brands includes the multiplatform properties of MTV Networks, BET Networks, Paramount Pictures and Paramount Home Entertainment. Viacom currently carries a Zacks Rank #5.
For the third quarter of fiscal 2016 (ending Sep. 2016), the Zacks Consensus Estimate for earnings stands at 97 cents, reflecting a year-over-year decline of a substantial 36.80%. The consensus mark was $1.02 about 30 days ago. Meanwhile, the consensus estimate for revenues is $3,398 million, down 10.3% year over year.
New Media Investment Group Inc. : New Media Investment Group is an online advertising and digital marketing company. The company's core products include daily newspapers; weekly newspapers; locally focused Websites; mobile sites and yellow page directories. The stock currently carries a Zacks Rank #5.
For the third quarter of 2016, the Zacks Consensus Estimate for earnings is pegged at 12 cents, reflecting a year-over-year decline of 14.29%. The consensus estimate stood at 28 cents about 28 cents about 30 days ago. Meanwhile, the consensus estimate for revenues is $309 million, down 1% year over year.
Twenty-First Century Fox Inc. (FOXA - Free Report) : Twenty-First Century Fox is involved in creating and distributing media services. Its business portfolio consists of cable, broadcast, film, pay TV and satellite assets. The stock currently carries a Zacks Rank #5. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
For the first quarter of 2017 (ended Sep, 2016), the Zacks Consensus Estimate for earnings stands at 44 cents, highlighting year-over-year improvement of 16.05%. However, the estimate was pegged at 49 cents about 60 days ago. Meanwhile, the consensus estimate for revenues is $6,453 million, up 6.2% year over year.
Gannett Co. Inc. (GCI - Free Report) : Gannett owns the publishing assets of the legacy Gannett company following its Jun 2015 split into two publicly traded companies. The new Gannett owns the USA Today and a host of other media assets. Gannett currently carries a Zacks Rank #4.
For the third quarter of 2016, the Zacks Consensus Estimate for earnings stands at 16 cents, reflecting year-over-year decline of a whopping 62.79%. The consensus estimate stood at 31 cents 60 days ago. Meanwhile, the consensus estimate for revenues stands at $779 million, up 11.1% year over year.
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U.S. Media Industry in Trouble: 4 Stocks to Steer Clear Of
The U.S. media and entertainment industry has long been grappling with declining advertising revenues and global economic volatility. The rising popularity of online sites over print media has also dealt a heavy blow to the industry, making the print-advertising model increasingly irrelevant. Cord cutting by TV viewers is also on the rise.
The media and entertainment industry is one of the rapidly changing areas in the economy. Massive technical changes in content creation, aggregation and distribution platforms have rendered the traditional business model unprofitable. Starting from interactive gaming, films, broadcast TV, print and publishing to live entertainment, social media, digital advertising; the media industry is evolving in a completely new way. These changes have made the survival of the incumbent media behemoths highly challenging.
Advertising remains a significant source of revenue for the media industry that in turn depends on the health of the economy. Advertising volumes are currently under pressure as advertisers refrain from making upfront commitments in an economy under recovery.
Spending on media continues to shift from traditional to digital products and services at an overwhelming pace. In general, digital advertising rates are comparatively lower than advertising rates in traditional media. As a result, advertisers can maintain or expand their reach through digital media by spending a portion of their budget. The growing adoption of digital media as the advertising platform has impeded advertising revenue growth in the traditional media companies.
The cable TV industry in the U.S. is highly matured and saturated. Most of the large media companies’ flagship cable channels are already distributed and therefore, chances of higher revenues are limited. In addition, the media industry is categorised as an intensely competitive one.
Zacks Industry Rank
Within the Zacks Industry classification, the Media Conglomerates industry is part of the Consumer Discretionary sector, which is one of 16 Zacks sectors. We rank all the 260 plus industries in the 16 Zacks sectors based on the earnings outlook and fundamental strength of the constituent companies in each industry. To learn more visit: About Zacks Industry Rank.
As a point of reference, the outlook for industries with Zacks Industry Rank #88 and lower is 'Positive,' between #89 and #176 is 'Neutral' and #177 and higher is 'Negative.' The Zacks Industry Rank for Media Conglomerates is #215. Analyzing the Zacks Industry Rank, it is apparent that the outlook on the Media Conglomerates industry is showcasing a Negative view.
Stocks to Avoid
At this stage, we believe investors should avoid stocks which carry an unfavorable Zacks Rank. Taking these factors into account, we present four stocks with either a Zacks Rank #5 (Strong Sell) or Zacks Rank 4 (Sell) which should be avoided at the moment.
Viacom Inc. : Viacom is a leading global entertainment content company whose family of prominent and respected brands includes the multiplatform properties of MTV Networks, BET Networks, Paramount Pictures and Paramount Home Entertainment. Viacom currently carries a Zacks Rank #5.
For the third quarter of fiscal 2016 (ending Sep. 2016), the Zacks Consensus Estimate for earnings stands at 97 cents, reflecting a year-over-year decline of a substantial 36.80%. The consensus mark was $1.02 about 30 days ago. Meanwhile, the consensus estimate for revenues is $3,398 million, down 10.3% year over year.
New Media Investment Group Inc. : New Media Investment Group is an online advertising and digital marketing company. The company's core products include daily newspapers; weekly newspapers; locally focused Websites; mobile sites and yellow page directories. The stock currently carries a Zacks Rank #5.
For the third quarter of 2016, the Zacks Consensus Estimate for earnings is pegged at 12 cents, reflecting a year-over-year decline of 14.29%. The consensus estimate stood at 28 cents about 28 cents about 30 days ago. Meanwhile, the consensus estimate for revenues is $309 million, down 1% year over year.
Twenty-First Century Fox Inc. (FOXA - Free Report) : Twenty-First Century Fox is involved in creating and distributing media services. Its business portfolio consists of cable, broadcast, film, pay TV and satellite assets. The stock currently carries a Zacks Rank #5. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
For the first quarter of 2017 (ended Sep, 2016), the Zacks Consensus Estimate for earnings stands at 44 cents, highlighting year-over-year improvement of 16.05%. However, the estimate was pegged at 49 cents about 60 days ago. Meanwhile, the consensus estimate for revenues is $6,453 million, up 6.2% year over year.
Gannett Co. Inc. (GCI - Free Report) : Gannett owns the publishing assets of the legacy Gannett company following its Jun 2015 split into two publicly traded companies. The new Gannett owns the USA Today and a host of other media assets. Gannett currently carries a Zacks Rank #4.
For the third quarter of 2016, the Zacks Consensus Estimate for earnings stands at 16 cents, reflecting year-over-year decline of a whopping 62.79%. The consensus estimate stood at 31 cents 60 days ago. Meanwhile, the consensus estimate for revenues stands at $779 million, up 11.1% year over year.
Confidential: Zacks' Best Investment Ideas
Would you like to see a hand-picked "all-star" selection of investment ideas from the man who heads up Zacks' trading and investing services? Steve Reitmeister knows when key trades are about to be triggered and which of our experts has the hottest hand. Click for his selected trades right now >>