News Corporation NWSA, the diversified media conglomerate, is slated to report second-quarter fiscal 2016 results on Feb 4. The big question facing investors now is, whether the company will be able to deliver a positive earnings surprise in the quarter to be reported. In the trailing four quarters, News Corporation missed the Zacks Consensus Estimate by an average of 8%. Let’s see how things are shaping up for this announcement.
Zacks Model Shows Unlikely Earnings Beat
Our proven model does not conclusively show that News Corporation is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. News Corporation has an Earnings ESP of -4.17% as the Most Accurate estimate stands at 23 cents, while the Zacks Consensus Estimate is pegged at 24 cents. Moreover, the company carries a Zacks Rank #4 (Sell). We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Factors Influencing this Quarter
Foreign currency headwinds and soft advertising demand may weigh upon the company’s performance in the quarter to be reported. Advertising, which forms a major part of News Corporation’s total revenue (approximately 44% of fiscal 2015 total revenue), remains highly vulnerable to the economic conditions. Total advertising revenue dropped 4.3% during the first quarter of fiscal 2016. Advertising revenue fell across its News and Information Services segment due to the adverse impact of foreign currency fluctuations, softness in the print advertising market, and a decline in revenues at News America Marketing.
News Corporation is in a transitional phase, looking to diversify its revenue streams. Moreover, a sturdy balance sheet provides it with the financial flexibility to focus on strategic acquisitions, operational enhancement and shareholder-friendly moves.
Stocks Poised to Beat Earnings Estimates
Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:
Time Warner Inc. TWX has an Earnings ESP of +2.00% and a Zacks Rank #2 (Buy).
The Walt Disney Company DIS has an Earnings ESP of +1.38% and a Zacks Rank #3 (Hold).
Scripps Networks Interactive, Inc. SNI has an Earnings ESP of +1.98% and a Zacks Rank #3.
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