Time Warner Inc. (TWX) is slated to report its third-quarter 2014 results on Nov 5, before the opening bell. In the last quarter, the company had delivered a positive earnings surprise of 16.7%. Let’s see how things are shaping up for this announcement.
Factors Influencing This Quarter
Time Warner’s efforts such as foraying into new markets, divestment activities and digital endeavors augur well for its operating performance. This is also well evident from its better-than-expected last quarter results.
Further, the company’s investments in programming, production and marketing, coupled with its focus on operating and capital efficiencies bode well for its performance. However, Time Warner might face the unfavorable impact of the soft advertising environment and the risk of failure to renew affiliate contracts.
Earnings Whispers?
Our proven model does not conclusively show that Time Warner is likely to beat earnings 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. This is not the case here, as you will see below:
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is currently pegged at -1.06%. This is because the Most Accurate estimate of 93 cents stands below the Zacks Consensus Estimate of 94 cents.
Zacks Rank: Time Warner’s Zacks Rank #3 (Hold) increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise.
We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks That Warrant a Look
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 this quarter:
Best Buy Co., Inc. (BBY) has an Earnings ESP of +4.17% and a Zacks Rank #2 (Buy).
L Brands, Inc. (LB) has an Earnings ESP of +6.25% and a Zacks Rank #2.
The Kroger Co. (KR) has an Earnings ESP of +3.28% and a Zacks Rank #2.
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