With the earnings season in full swing, predictions of negative earnings growth is still the major talking point. However, as more and more companies report their earnings, actual results are turning out to be better than initially perceived. The extent of earnings and revenue beats this season is perhaps due to already lowered expectations as analysts had factored in the headwinds, bringing estimates down to easy-to-beat levels. Our Zacks Trend Report foresees an 8% decline in earnings and a 1% dip in revenues for the quarter on a year-over-year basis. Although data indicates the fourth consecutive quarter of an earnings decline, it should be noted that the degree of southward estimate revisions has slowed down considerably as the earnings season unfolded.
Is the ‘Earnings Recession’ for real? We leave that for time to answer. For now, let us focus on some cable and media conglomerates that are expected to report their quarterly results early next week.
Industry Trends
The broadcast TV industry is currently going through a transition. Even as the pay-TV business model continues to hold a major share of the market, it is facing stiff competition from the latest over-the-top (OTT) online video streaming service offerings. Apparently, massive growth in high-speed wireless networks and devices like smartphones and tablets has altered the taste of the millennial population to a great extent.
There are many Cable behemoths who own media companies. While the recent development in the pay-TV industry enabled such companies to generate revenues by selling original contents to OTT video streaming service providers, it has cannibalized their original source of revenues – subscription fees and advertisement fees – due to widespread cord-cutting. However, recently, many such cable companies have been jumping on the video streaming bandwagon in order to stay competitive. Additionally, pay-TV operators are now ‘skinning’ their packages to counter cord-cutting. For media companies, escalation in production and programming costs for original content remains a concern, going forward.
Watch Out for These Stocks
Following are a couple of companies scheduled to announce results early next week.
Cablevision Systems Corporation CVCis slated to release third-quarter fiscal 2015 results on May 2, before the market opens. Cablevision is consistently focused on its WiFi network, referred to as the “Optimum WiFi Network”, for growth. Additionally, Cablevision expects ongoing investments in the WiFi network to continue enhancing the value of its Freewheel service.