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Netflix (NFLX) to Report Q2 Earnings: What's in the Cards?

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Netflix Inc. (NFLX - Free Report) is set to report second-quarter 2018 results on Jul 16.

In the last reported quarter, the company’s earnings of 64 cents per share  grew 60% on a year-over-year basis and beat the Zacks Consensus Estimate by a penny. Revenues of $3.701 billion increased 40.4% year over year and came ahead of the consensus estimate of $3.689 billion.

For the second quarter of 2018, the Zacks Consensus Estimate for Netflix’s earnings per share and total revenues are pegged at 80 cents and $3.936 billion, respectively.

Netflix, Inc. Price and EPS Surprise

Netflix, Inc. Price and EPS Surprise | Netflix, Inc. Quote

Let’s see how things are shaping up for this announcement.

Factors to Consider

Netflix has been drawing strength from its growing portfolio of original content. The company has also been ramping up its efforts to boost regional programming, which is helping it expand its international presence.

The attractiveness of Netflix’s diverse content portfolio is evident from the fact that subscriber addition remained unaffected in the last reported quarter despite a hike in subscription prices.

Moreover, a recent survey by Piper Jaffray, which involved 1.1k domestic subscribers, showed that most of them have no problem paying more for the service. The firm says that when compared with the 2016 survey, subscribers’ willingness to pay more has increased considerably.

However, management expects to add 1.2 million subscribers in the domestic streaming segment and 5 million subscribers in the international segment in the soon-to-be-reported quarter, which is a bit conservative compared with the past quarters.

We assume that the start of FIFA World Cup during the second quarter might be a reason for the conservative expectation. Besides, cut-throat competition in the streaming space from players like (AMZN - Free Report) , HBO, Hulu, Facebook (FB - Free Report) Watch, Apple Music and The Walt Disney (DIS - Free Report) makes us anxious.

Additionally, due to high costs accompanying its rapid international expansion and production of original content, the company’s bottom line remains under threat.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. The Sell-rated stocks (Zacks Rank #4 or #5) are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Netflix has a Zacks Rank #3 and its Earnings ESP is -0.83%. This makes surprise prediction difficult.

You can see the complete list of today’s Zacks #1 Rank stocks here.

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