We expect Viacom Inc. (VIAB) to beat expectations when it reports fourth-quarter 2013 results before the market opens on Nov 14, 2013.
Why a Likely Positive Surprise?
Our proven model shows that Viacom is likely to beat earnings because it has the right combination of two key ingredients.
Zacks ESP: The Expected Surprise Prediction or Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +0.69%. This is a meaningful and leading indicator of a likely positive earnings surprise.
Zacks Rank: Viacom currently has a Zacks Rank #3 (Hold). Note that the stocks with Zacks Rank #1, 2 or 3 have a significantly higher chance of beating earnings. The Sell-rated stocks (Zacks Rank #4 and 5) should never be considered going into an earnings announcement.
The combination of Viacom’s Zacks Rank #3 and +0.69% Earnings ESP makes us confident of a positive earnings beat.
What is Driving the Better-Than-Expected Earnings?
Viacom benefits from a well-balanced asset mix with entertainment content at its core. It benefits immensely from its agreement to disribute digital content to online video streaming companies, such as Netflix and Hulu.
Viacom is hopeful that it will be able to expand its digital content distribution deals, both in the U.S. and in the international markets going forward. Moreover, Viacom is generating strong free cash flow, enabling the company to maximize its shareholders’ wealth through dividend payments and solid share repurchases.
Other Stocks to Consider
Other companies you may consider on the basis of our model, which have the right combination of elements to post an earnings beat this quarter are as follows:
Netflix, Inc. (NFLX) with Earnings ESP of +1.56% and a Zacks Rank #1 (Strong Buy).
TiVo Inc. (TIVO) with Earnings ESP of +16.67% and a Zacks Rank #2 (Buy).
DISH Network (DISH) with Earnings ESP of +4.76% and a Zacks Rank #2 (Buy).
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