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World Wrestling (WWE) Defies industry Trend, Stock Up 28% YTD

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The year has not been an encouraging one for Movie/TV Production/Distribution industry so far but despite belonging to the same industry World Wrestling Entertainment, Inc. (WWE - Free Report) has managed to navigate smoothly. Year to date, the industry has witnessed a marginal decline of 0.5% compared with the S&P 500’s gain of 12.8%. Stocks such as IMAX Corporation (IMAX - Free Report) , Twenty-First Century Fox, Inc. (FOXA - Free Report) and MSG Networks Inc. (MSGN - Free Report) , which belong to the aforementioned industry, have witnessed a decline of 26.4%, 5% and 0.7%, respectively.

However, the sluggish run of these stocks in the bourses have been to an extent mitigated by the exceptional performance of  WWE, whose shares have rallied 28.4% year to date. The bullish run of the stock may arouse your curiosity about how WWE managed to outperform the industry. Let’s find out the factors behind the stock’s upsurge.

Record Revenues Growth

The year 2016 registered record revenues generation in the history of the WWE. The company’s record revenues primarily came on the back of substantial increase in revenues in North America, Europe/Middle East/Africa (EMEA) and gain in WWE Network’s total subscriber base. The company has carried the momentum of 2016 in to 2017, with the first and second quarter witnessing revenue growth of 10% and 8%, respectively.

Further, analysts polled by Zacks expect sales increase of 7.2% for 2017, higher than the industry’s growth estimate of 6.9%.

Strategic Efforts to Augment Top Line Further

We believe WWE will continue to report record revenue growth as it has not only extended its earlier deal with different companies but also signed agreement with new service provider for airing its flagship program Raw and SmackDown in different countries.

The strong relationship between WWE and Groupe AB is set to continue into the 18th year with both companies extending the partnership. Per the deal, both the companies have signed multi-year agreement for airing WWE programming, which comprises of WWE’s leading shows including the likes of Raw as well as SmackDown.

In July, in an effort to augment revenues WWE reached an agreement with sports marketing agency Lagardère Sports, which will facilitate it to acquire international sponsorship. Per the agreement, Lagardère Sports will help in building partnership portfolio through its sponsorship proficiency and global sales channel in all international regions, excluding China. We believe with increasing subscription based video streaming services WWE Network through its vast presence in over 180 countries will aid top-line growth. The company has also recently reached an agreement to broadcast hit programs like Raw and SmackDown in Japan, Caribbean and Australia. Notably, WWE and TVA Sports also signed an agreement for airing Raw in French, beginning Oct 10.

OIBDA View Looks Encouraging

Management is optimistic about achieving another great year of revenues and adjusted OIBDA growth. The company is targeting adjusted OIBDA of $100 million for 2017, which is nearly up 25% from the 2016. In first-half 2017, the company has already generated adjusted OIBDA of $36.7 million. For the third quarter, adjusted OBIDA is projected in the range of $31-$35 million driven by top-line growth, WWE Network subscribers and contractual television rights fees. In the fourth quarter, it anticipates adjusted OIBDA of at least $28-$32 million.

WWE currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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