The Q2 earnings season has so far seen reports from 286 S&P 500 companies as of Jul 28 (per the Earnings Preview). The positive highlights of the season have been broad-based growth, a slew of positive surprises, record earnings tally as well as favorable trends.
In fact, with 214 members yet to release their results per the report, the second-quarter earnings for the index are anticipated to improve 9.2% from the year-ago period, with total revenue rising to 5%.
According to the picture so far, we note that the pace of earnings and revenue growth is steadily accelerating from relative to pre-season expectations. Notably, the latest scorecard reveals that out of the 286 S&P 500 members that have come up with their quarterly numbers, approximately 74.5% delivered positive earnings surprises, while 69.2% surpassed top-line expectations. Total earnings for these companies were up 11.3% from the year-ago quarter, while revenues increased 6.1%.
The performance of the index is not restricted to a single sector, and of the 16 Zacks sectors, four are expected to witness an earnings decline in the second quarter. Of these, Conglomerates sector is likely to be a major drag. Let’s focus on two media stocks that form part of the Consumer Discretionary sector.
What to Expect?
Currently, the sector is placed at the bottom 44% of the Zacks classified sectors (9 out of 16). Looking into the last six months, we note that the broader sector has gained 8.8%, which is in line with the S&P 500 index’s growth.
Per the Earnings Preview, total revenues for the sector are anticipated to increase by 8.1% while earnings are expected to remain flat. This compares with the year-over-year earnings and revenues growth of 14.2% and 11.9%, respectively, in the first quarter.
As of Jul 28, 42.9% of the total companies in the Consumer Discretionary sector have already reported their results. Out of these, 66.7% have pulled off positive earnings surprise, while 53.3% outpaced revenue expectations.
What Lies Ahead for these Media Stocks?
Let’s take a look at a couple of Media stocks that are queued up for second-quarter earnings releases on Aug 2.
New-York based media and entertainment company, Time Warner Inc. (TWX - Free Report) , is likely to beat earnings estimates this quarter. This is because a stock needs to have both a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP for this to happen. You may uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Here, the Most Accurate estimate stands at $1.21 and the Zacks Consensus Estimate is pegged lower at $1.19. So the ensuing +1.68% ESP and the company’s Zacks Rank #2 makes us reasonably confident of an earnings beat. You can see the complete list of today’s Zacks #1 Rank stocks here.
Time Warner’s foray into new markets and digital endeavors augur well for its operational performance. We also think that management’s focus on original programming, cost reduction and increasing investments in key areas will enhance profitability. (Read more: How Time Warner Looks Just Ahead of Q2 Earnings)
Next, let’s see what’s in store for Sinclair Broadcast Group, Inc. (SBGI - Free Report) , which has witnessed average negative earnings surprise of 0.4% in the trailing four quarters.
This television broadcasting company is unlikely to beat earnings estimates in the to-be-reported quarter. This is because it has Earnings ESP of 0.00% with both the Most Accurate estimate and the Zacks Consensus Estimate currently pegged at 43 cents. Although the company’s Zacks Rank #3 increases the predictive power of ESP, but we need a positive Earnings ESP in order to be confident about an earnings surprise.
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