As per the Zacks Industry categorization, the Cable Television industry falls under the broader Consumer Discretionary sector, which is one of the 16 Zacks sectors.
The cable television industry, one of the important industries in the U.S., has been losing customers to wireless telecom operators and online streaming service providers. The existing saturation and competition of the multi-channel domestic video market has caused this loss. Online video streaming service providers such as Netflix Inc. NFLX, Hulu.com, YouTube etc., pose severe threat to cable TV operators due to their cheap source of TV programming.
In order to cope up with the loss and remain competitive in the market, pay-TV operators have started offering internet TV services with selected TV channels at cheaper rates. Meanwhile, two major cable multi service operators (MSOs) in the U.S., Comcast Corp. CMCSA and Charter Communications Inc. CHTR, have agreed to jointly work on their wireless services businesses to explore opportunities, and accelerate and enhance each other’s ability to participate in the national wireless marketplace.
With such mixed prospects and strategic business ideas, the industry has gained 18.62% outperforming the S&P 500’s increase of 13.7% over the past one year.
The upcoming weeks will see some of the major cable television companies, such as Comcast Corp., Charter Communications, DISH Network Corp. DISH and Liberty Global plc. LBTYA releasing second-quarter 2017 earnings results.
Shaw Communications Inc. SJR has reported impressive financial results for the third quarter of fiscal 2017, on Jun 28, wherein both the bottom and top line surpassed the Zacks Consensus Estimate.
While Comcast and Charter Communications will report results on Jul 27, before market opens, Liberty Global plans to release its numbers on Aug 7, after market close. We look forward to see how these cable companies will perform.
An Overview of Q2 Earnings (As of Jul 21, 2017)
We are in the thick of the second-quarter earnings season with results from 97 S&P 500 members, accounting for 28.1% of the index’s total market capitalization (based on the latest Earnings Preview article). Total earnings for these companies are up 8.4% from the year-ago period on 5.1% higher revenues, with 78.4% beating EPS estimates and 72.2% surpassing revenue estimates.
More than 800 companies will report results this week, including 183 S&P 500 members.
Q2 Expectations (as a whole & sector specific)
For the second quarter, we anticipate the prospects of companies to improve steadily. In fact, our latest scorecard projects total second-quarter earnings improvement of 8.6% from the year-ago period on 4.7% higher revenues. This would follow 13.3% earnings growth in first-quarter 2017 on 7.0% revenue growth, recording the highest increase in almost two years.
We predict that second-quarter earnings in the Consumer and Discretionary space will decline 1.5%, while revenues will rise 7.8% from the year-ago period.
Cable TV Stocks’ Expected Q2 Earnings Release on Jul 27
Our quantitative model offers some insight into stocks that are about to report earnings. Per the model, a stock needs to have the right combination of the two key ingredients, a positive Earnings ESP and a Zacks Rank #3 (Hold) or better, to deliver an earnings beat.
Meanwhile, we also caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Investors interested in cable TV stocks can watch out for the two cable companies that are expected to report their second-quarter 2017 numbers, before the opening bell on Jul 27.
Headquartered in Pennsylvania, Comcast is one of the leading cable MSOs in the U.S.
The company has an Earnings ESP of +2.08% because the Most Accurate estimate is pegged at 49 cents, higher than the Zacks Consensus Estimate of 48 cents. A favorable Earnings ESP indicates a positive earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Moreover, Comcast has a Zacks Rank #3, which increases the predictive power of the ESP. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Hence, a positive Earnings ESP along with a Zacks Rank #3, makes us confident of an earnings beat in the to-be reported quarter (read more: Can Comcast Deliver a Beat this Earnings Season?).
In the last four quarters, the company’s bottom line matched the Zacks Consensus Estimate thrice and surpassed only once in the year-ago quarter. The average beat is 5.11%.
Comcast Corporation Price and EPS Surprise
Comcast Corporation Price and EPS Surprise | Comcast Corporation Quote
Headquartered in Connecticut, Charter Communications is a leading broadband communications company and the fourth-largest cable operator in the U.S.
Charter Communications has an Earnings ESP of -20.99%. This is because the Most Accurate estimate is at 64 cents while the Zacks Consensus Estimate is pegged at 81 cents.
The company has a Zacks Rank #3, which increases the predictive power of ESP. However, the company’s negative ESP makes surprise prediction difficult (read more: Charter Communication Q2 Earnings: What's in Store?).
Last quarter, the company saw a negative earnings surprise of 42.42%. However, the company’s earnings surpassed the Zacks Consensus Estimate in three of the previous four quarters, with an average beat of 94.11%.
Charter Communications, Inc. Price and EPS Surprise
Charter Communications, Inc. Price and EPS Surprise | Charter Communications, Inc. Quote
Irrespective of an earnings beat or miss, investors should focus on companies’ fundamentals to make investment decisions. Therefore, don’t forget to check our full write-up on earnings releases of these stocks later.
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Netflix, Inc. (NFLX) : Free Stock Analysis Report
Shaw Communications Inc. (SJR) : Free Stock Analysis Report
DISH Network Corporation (DISH) : Free Stock Analysis Report
Liberty Global PLC (LBTYA) : Free Stock Analysis Report
Comcast Corporation (CMCSA) : Free Stock Analysis Report
Charter Communications, Inc. (CHTR) : Free Stock Analysis Report
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