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High Expenses to Hurt Madison Square's (MSG) Q2 Earnings

Zacks Equity Research

The Madison Square Garden Company MSG is scheduled to report second-quarter fiscal 2019 results on Feb 1, before the opening bell.

The company’s undoubted efficiencies in operations, and continual expansion through acquisitions and partnerships may have aided revenues in the fiscal second quarter. However, high costs stemming from ventures and partnerships are likely to have affected earnings.

The company is expected to tread on growth trajectory, given its first-class operations, coupled with innovations and the ability to deliver top-class experiences to guests. In a year, its shares have gained 30.7% against 17.5% collective decline of the industry it belongs to. Moreover, Madison Square’s earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters, the average beat being 83.5%.

Factors at Play

Madison Square continues to benefit from efforts to reinstate growth through multi-marketing agents. The company’s iconic venues hosted a number of concerts, marquee events and family shows. Various sales-building efforts, double-digit sponsorship and signage growth are expected to have led the top line to grow in the fiscal second quarter.

Subsequently, the Zacks Consensus Estimate for net revenues in the fiscal second quarter is pegged at $593.2 million, reflecting a 10.6% year-over-year increase.

However, the company’s greater focus on partnerships and marketing come at a cost of increased expenses, which in turn may have affected earnings in the to-be-reported quarter. The consensus estimate pegs earnings of $2.30 in the fiscal second quarter, suggesting a 27.9% decline from the year-ago quarter.

What Our Model Predicts

Our proven model does not suggest a beat for Madison Square in the quarter to be reported. That is because a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for that to happen.

Earnings ESP: The Earnings ESP for the company is 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Madison Square currently carries a Zacks Rank #1.

Meanwhile, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.

The Madison Square Garden Company Price and EPS Surprise


The Madison Square Garden Company Price and EPS Surprise | The Madison Square Garden Company Quote

Stocks to Consider

Here are some companies in the Consumer Discretionary sector, which, according to our model, have the right combination of elements to come up with an earnings beat this quarter:

Deckers Outdoor DECK has an Earnings ESP of +3.63% and it currently sports a Zacks Rank #1. The company is scheduled to report quarterly numbers on Jan 31. You can see the complete list of today’s Zacks #1 Rank stocks here.

Cinemark CNK has an Earnings ESP of +10.12% and a Zacks Rank #2. The company is anticipated to report quarterly results on Feb 22.

SeaWorld SEAS has an Earnings ESP of +38.46% and a Zacks Rank #1. The company is expected to report quarterly numbers on Feb 26.

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