It has been about a month since the last earnings report for World Wrestling Entertainment (WWE - Free Report) . Shares have lost about 1.2% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is WWE due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
World Wrestling Entertainment Beats on Q2 Earnings
After reporting wider-than-expected loss in the first quarter of 2019, World Wrestling Entertainment, Inc. swung back to profit in the second quarter. However, net revenues fell short of the Zacks Consensus Estimate for the second quarter in row. Also, both the top and bottom lines came below the prior-year period.
This integrated media and entertainment company posted earnings of 11 cents a share as against the Zacks Consensus Estimate of loss of 3 cents. The company had reported adjusted earnings of 14 cents a share in the year-ago period. The company’s bottom line was favorably impacted by lower operating expenses, fall in marketing and selling expenses, dip in general and administrative expenses and reduced interest and tax expenses.
WWE’s revenues of $268.9 million missed the Zacks Consensus Estimate of $277.2 million and fell 5% year over year. Management pointed that lower revenue from the Media, Live Events and Consumer Products business segments hurt the top line.
Nevertheless, management continues to anticipate record revenue of approximately $1 billion for 2019. Clearly, the company’s effort to focus on increasing original content production, localization and strategic initiatives as well as digitization and international development bode well.
Total adjusted OIBDA came in at $34.6 million, exceeding the company’s guided range of $19-$24 million. This can be attributed to revenue recognized in relation with recent event in Saudi Arabia. However, the metric fell sharply from adjusted OIBDA of $43.5 million reported in the year-ago quarter. Meanwhile, adjusted OIBDA margin contracted to 13% from 15% in the prior-year period.
Without any doubt management is strengthening and expanding WWE Network through creation of new content along with implementation of programs which will have higher customer attraction and retention power. Further, the introduction of new features, expansion of distribution platforms and foraying into new regions will aid the drive. The company is increasing the monetization of WWE content worldwide. The company recently entered into content distribution deals with BT Sport in the U.K., Fox Sports in Latin America and PP Sports in China.
With revenue expected to increase considerably courtesy of new U.S. content distribution agreements and media rights deal in the MENA region, management is aiming to attain adjusted OIBDA of at least $200 million for 2019, up at least 12% from adjusted OIBDA of $178.9 million in 2018. The company now anticipates third quarter adjusted OIBDA in the band $17-$22 million.
Media Division: Revenues from the Media division decreased 3% to $197 million owing to the performance of WWE Network and the timing of episodic series for programs, such as Total Bellas. These were partly mitigated by higher core content rights fees. We note that Network revenue declined 8%, while advertising and sponsorship fell 4%. On the contrary, core content rights fees jumped 4%.
The number of average paid subscribers fell 6% year over year to approximately 1.69 million. Management now envisions average paid subscribers of approximately 1.53 million for the third quarter, reflecting a decline of 8% from the year-ago period. During the quarter, digital video views surged 17% to 9 billion, while hours consumed soared 22% to 324 million across digital platforms.
Live Events: Revenues from Live Events came in at $48.8 million, down 7% year over year on account of fall in ticket sales at the international events, thanks to fewer events and weaker performance.
A total of 76 events (excluding NXT) took place in the quarter — 53 in North America and 23 in international markets. In the prior-year quarter, there were 90 events, of which 61 were held in North America and 29 in international markets. North American ticket sales remained almost flat at $33.6 million. The average ticket price soared 16% to $94.56 mainly due to changes in the mix of venues. However, eight less events impacted the results. Average attendance dropped 2% to roughly 5,800. International ticket sales plunged around 29.6% to $9.5 million due to 14% fall in average attendance to 4,900 and six less events. This was partly offset by 6% jump in average ticket price of $83.34.
Consumer Products Division: The segment’s revenues came in at $23.1 million, down 13% year over year owing to fall in sales of merchandise at the company’s e-commerce site, WWE Shop, as well as lower royalties from the sale of toy products and decrease in sales of merchandise at live-event venues.
Other Financial Details
WWE ended the quarter with cash and cash equivalents of $98.2 million, long-term debt of $23.1 million and shareholders’ equity of $325.3 million.
How Have Estimates Been Moving Since Then?
Estimates revision followed a downward path over the past two months. The consensus estimate has shifted -113.33% due to these changes.
Currently, WWE has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
WWE has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.