DreamWorks Animation SKG Inc.DWA is scheduled to release second-quarter 2015 results after the market closes on Aug 4.
Last quarter, the moviemaker had incurred a loss (excluding a $31.9 million pre-tax restructuring charge) of 25 cents per share, narrower than the Zacks Consensus Estimate of a loss of 49 cents. Let’s see how things are shaping up for this announcement.
Factors at Play
We believe the company’s top line will perform well in the second quarter of 2015 on the back of strength in its Feature Film segment. Revenues from blockbusters like How to Train Your Dragon 2 and Home are likely to boost the Feature Film unit.
The Consumer Product unit at DreamWorks is also expected to perform well in the second quarter of 2015. DreamWorks is increasingly focusing on its Consumer Product business in order to generate more licensing revenues from its content library.
We are also encouraged by DreamWorks’ strategy to ink several online programming deals with major companies as well as target the youth with new content made available through TV shows and movies. For instance, the deal between Google Inc.’s GOOGL video-sharing site YouTube and DreamWorks’ AwesomenessTV to release several feature films on the website over the next two years holds immense potential.
However, we expect the top line in the second quarter to be hurt by adverse foreign currency movements, courtesy a strong dollar. Moreover, the bottom line is likely to be impacted adversely due to costs associated with the expansion of the AwesomenessTV operations.
Earnings Whispers
Our proven model does not conclusively show that DreamWorks is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here as elaborated below.
Zacks ESP: Earnings ESP represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate. Thus, the ESP for DreamWorks currently stands at 0.00% as the Most Accurate estimate is in line with the Zacks Consensus Estimate of a loss of 28 cents.
Zacks Rank: DreamWorks carries a Zacks Rank #3 which increases the predictive power of ESP. However, the company’s 0.00% ESP makes surprise prediction difficult.
Please note that Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.
Stocks to Consider
Here are some companies you may want to consider as our model shows these have the right combination of elements to post an earnings beat this quarter.
Nexstar Broadcasting Group, Inc. NXST, which has an earnings ESP of +12.25% and a Zacks Rank #3. The company is scheduled to release its earnings results on Aug 6.
Walt Disney DIS, which has an earnings ESP of +2.16% and a Zacks Rank #3. The company is scheduled to release its earnings numbers on Aug 4.
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