We expect DreamWorks Animation SKG Inc. DWA to beat estimates when it reports third-quarter 2015 financial results on Nov 5.
In the last quarter, the company posted a 55.17% earnings surprise. Let’s see how things are shaping up for this announcement.
Why a Likely Positive Surprise
Our proven model shows that DreamWorks is likely to beat estimates because it has the right combination of two key ingredients.
Zacks ESP: Earnings ESP for DreamWorks stands at +57.14% because the Most Accurate estimate is a loss of 3 cents while the Zacks Consensus Estimate is a loss of 7 cents. This serves as a meaningful and leading indicator of a likely positive earnings surprise.
Zacks Rank: DreamWorks currently has a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1, 2 or 3 have a significantly higher chance of beating estimates. Conversely, the Sell-rated stocks (Zacks Rank #4 and 5) should never be considered going into an earnings announcement.
The combination of DreamWorks’ Zacks Rank #3 and +57.14% ESP makes us reasonably confident of a beat.
What is Driving the Better-Than-Expected Earnings?
The growing popularity of DreamWorks-owned AwesomenessTV continues to drive the company’s multi-platform business. A few days back, AwesomenessTV struck a multi-year deal with Endemol Shine Group to expand its international presence. We believe that the partnership will improve the company’s top line to a considerable extent.
Moreover, DreamWorks sold its 14.7 acre Glendale headquarters for $185 million which we believe will boost the company’s balance sheet and also help DreamWorks increase investments in movie production. Furthermore, the company’s cost-cutting strategies will likely help improve margins.
Other Stocks to Consider
Here are some other companies you may want to consider as our model shows these have the right combination of elements to post an earnings beat this quarter.
Scripps Networks Interactive, Inc. SNI with an earnings ESP of +1.03% and a Zacks Rank #2 (Buy).
Townsquare Media, Inc. TSQ with an earnings ESP of +2.5% and a Zacks Rank #2.
Viacom, Inc. VIAB with an earnings ESP of +0.66% and a Zacks Rank #3.
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