New York-based, Viacom, Inc. (VIAB - Free Report) is slated to release third-quarter fiscal 2017 results on Aug 3, after the market closes.
Last quarter, the company delivered a positive earnings surprise of 33.90%. The company has an impressive track record of beating estimates in each of the preceding four quarters with an average beat of 17.07%.
Let’s see how things shape up for this announcement.
Factors Likely at Play
Viacom’s proposed merger with CBS Corp. (CBS - Free Report) has been called off. National Amusements Inc., which owns the majority voting shares of both the companies, has decided that the companies should function as separate entities. This is a concern for the investors as a merger would have been beneficial for Viacom, as that would have provided it with the much-needed cost synergies. However, a lack of this development might affect the company’s results in the third quarter. Also, its high debt levels remain a big concern and are anticipated to hurt results in the to be reported quarter.
Due to these headwinds, shares of the company have underperformed the industry it belongs to in the last three months. The stock has lost a massive 16.29% compared with the industry’s 2.67% loss.
However, Viacom is expected to perform well on the top-line front in the fiscal third quarter, owing to higher revenues at its Filmed Entertainment segment.
Our proven model does not conclusively show that Viacomis likely to beat estimates 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. But that is not the case here as elaborated below.
Zacks ESP: Viacom has an Earnings ESP of -4.72%. This is because the Most Accurate estimate stands at $1.01 per share, while the Zacks Consensus Estimate is pegged higher at $1.06. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Although Viacom’s Zacks Rank #3 increases the predictive power of ESP, its negative ESP doesn’t make us confident of an earnings surprise.
We caution against all Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Investors interested in the broader Consumer Discretionary space, may consider the following stocks which per our model, possess the right combination of elements to post an earnings beat this quarter:
Discovery Communications, Inc. (DISCA - Free Report) has an Earnings ESP of +1.41% and a Zacks Rank #3. The company will report second-quarter earnings on Aug 8.
AMC Networks Inc. (AMCX - Free Report) has an Earnings ESP of +1.42%% and a Zacks Rank #3. The company will report second-quarter earnings on Aug 3. You can see the complete list of today’s Zacks #1 Rank stocks here.
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