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Will Scripps Networks (SNI) Disappoint Earnings this Season?

Zacks Equity Research

Scripps Networks Interactive, Inc. (SNI) is set to release its second-quarter 2014 financial numbers before the opening bell on Aug 7, 2014.

In the last reported quarter, the company’s earnings had surpassed the Zacks Consensus Estimate by a margin of 7.41%. Let’s see how things are shaping up prior to this announcement.

Factors to be Considered this Quarter

Nearly 70% of Scripps Networks’ revenues are derived from marketing and advertising spending by the corporate sector in the U.S. Advertising and marketing spending is sensitive to economic conditions, and tends to decline in recessionary periods. Thus, a high dependence on the volatile corporate sector spending exposes Scripps Networks to considerable risks.

In the previous quarter, Scripps Networks’ selling and administrative expenses rose 4.8% while service cost increased 10.6%, mainly due to spiraling programming expenses

Earnings Whispers?

Our proven model does not conclusively show that Scripps Networks is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here as elaborated below.

Zacks ESP: Scripps Networks has a negative Zacks ESP. This is because the Most Accurate estimate stands at $1.12 while the Zacks Consensus Estimate is pegged higher at $1.13. This leads to an ESP of -0.89% for Scripps Networks.

Zacks Rank: Scripps Networks carries a Zacks Rank #3 which when combined with a -0.89% ESP lowers the possibility of an earnings surprise.

We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing a negative estimate revision momentum.

Other Stocks to Consider

Here are some companies to consider as our model shows they have the right combination of elements to post an earnings beat this quarter.

Time Warner Inc. (TWX) has an earnings ESP of +1.19% and holds a Zacks Rank #3.

TELUS Corporation (TU) has an earnings ESP of +1.85% and carries a Zacks Rank #3.

RigNet, Inc. (RNET) has an earnings ESP of +6.25% and carries a Zacks Rank #3.

Read the Full Research Report on TU
Read the Full Research Report on TWX
Read the Full Research Report on SNI
Read the Full Research Report on RNET

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