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Subscriber Growth, TV Right Fees to Drive WWE Q4 Earnings

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World Wrestling Entertainment, Inc. (WWE - Free Report) is scheduled to report fourth-quarter 2017 financial numbers, before the opening bell on Feb 8. In the previous quarter, the company beat the Zacks Consensus Estimate by 40%.

The company’s earnings have surpassed the Zacks Consensus Estimate in two of the trailing four quarters by an average of 7.4%. Here’s a discussion of the determinants of the fourth-quarter results.

What to Expect?

The question lingering in investors’ minds now is whether World Wrestling Entertainment will be able to post positive earnings surprise in the quarter to be reported. The current Zacks Consensus Estimate for the quarter under review is 20 cents, in comparison with year-ago quarter earnings of 10 cents. We note that the Zacks Consensus Estimate has increased by a penny over the past 7 days. Analysts polled by Zacks anticipate revenues of $206 million compared with $194.9 million reported in the year-ago quarter.

Factors Influencing This Quarter

Having garnered stellar revenues in 2017, WWE has become investors’ favorite now. In the first, second and third quarter of 2017, the company registered top-line growth of 10%, 8% and 13.5%, respectively. We believe WWE will continue to garner record revenues as it has not only extended its earlier deal but also signed agreement with new service provider for airing its flagship program — Raw and SmackDown — in different countries. Further, subscriber growth and worldwide increase in TV rights fees are likely to provide an impetus to the top line further.

Revenues from international sponsorship, which increased 29% in the first nine months of 2017, will receive an additional stimulus from WWE’s agreement with sports marketing agency Lagardère Sports. We believe with increasing subscription-based video streaming services, WWE Network, through its vast presence in more than180 countries, will be able to capitalize on the trend.

Moreover, management is optimistic about achieving another great year of adjusted OIBDA growth. For the fourth quarter, adjusted OBIDA is projected in the range of $31-$35 million buoyed by top-line growth, WWE Network subscribers and contractual television rights fees.

However, WWE which distributes home entertainment content in both physical (DVD and Blu-Ray) as well as digital formats has been reeling under lower revenues. In 2016, home entertainment net revenues came in at $13.1 million in comparison with $13.4 million and $27.3 million in 2015 and 2014, respectively. Further, the trend continued in the first, second and third quarter of 2017, with home entertainment revenues declining 27%, 3.2% and 8%, respectively. The decline can be attributed to consumers’ consistent shift to digital formats, downloaded or streamed over the Internet.

 

World Wrestling Entertainment, Inc. Price, Consensus and EPS Surprise

 

 

What the Zacks Model Unveils

Our proven model shows that WWE is likely to beat estimates this quarter as the stock has the right combination of two key ingredients — a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen.   

WWE has an Earnings ESP of +2.56% and carries a Zacks Rank #2. This makes us reasonably confident of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
 
Other Stocks Poised to Beat Earnings Estimates

Here are some other companies you may want to consider as our model shows that these too have the right combination of elements to post an earnings beat:

The New York Times Company (NYT - Free Report) has an Earnings ESP of +1.70% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Activision Blizzard (ATVI - Free Report) has an Earnings ESP of +4.99% and a Zacks Rank #3.

Discovery Communications (DISCA - Free Report) has an Earnings ESP of +6.50% and a Zacks Rank #3.

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